Delivering simpler and safer billing, more control over when and how to pay and a simpler alternative to traditional invoicing, Request to Pay is becoming increasingly popular. It is a secure messaging framework – not a payment solution in itself – that is designed to complement existing payment infrastructure. It allows billers to easily request direct account-to-account payments via the payer’s existing online banking account or app, and enables the payer to send a real-time payment quickly and easily, query the amount requested, decline to pay, or open a dialogue with the biller.
Alongside Buy Now Pay Later (BNPL), Request to Pay is emerging as a cornerstone of payments in the digital era. Complementing existing payments infrastructure, sitting alongside Direct Debit and other payment methods, it gives companies that have, historically, relied on invoicing for payment – and all the time, admin and delays that entails – the ability to turn the tables and request payment for a bill. It also dramatically cuts the time and cost involved in chasing payments and settling disputes.
The advantage for the seller is clear; the advantages for buyers are also considerable. On receiving a ‘Request to Pay’, a customer can quickly and easily pay in full or in part, opt to communicate with the biller, ask for more time or even decline to pay. This brings more flexibility and control over how they manage their finances, increasing financial inclusion.
Around the world, Request to Pay is in its early days. According to a recent study published in Financial IT in February, fewer than one in five European banks currently offer Request to Pay solutions although this is expected to reach one in two by the end of 2023. But as a payments innovation that is fit for purpose for the future, it is already showing tremendous growth, indicating the enormous appetite for a flexible, low cost and secure new way to manage regular or one-off payments.
The same research revealed that 73% of the industry stakeholders surveyed saw cost reduction in reconciliation as a main benefit, with real-time cashflow visibility and general cost reduction following close behind (63% and 56%, respectively).
An evolving picture
Currently most Request to Pay schemes are built as a national model designed to be connected to regional interfaces such as P27 in Northern Europe. Indeed, Request to Pay frameworks are already established in the UK, EU, Australia and the Nordics with a US scheme having gone live in 2021 and a second estimated to go live in 2023.
Most regions are utilising a convenient one-to-many platform for merchants and banks, through which banks access a suite of standardised and robust Request to Pay services. The platform model empowers payer and payee by providing a central overview of transactions and real-time insights into flow of funds.
Another option, however, is where payments are handled via a single integration between a third-party provider and the bank’s API architecture. Customers provide the third-party with their username and password for each transaction, and the third-party accesses the bank account to retrieve the funds. Exchange of funds occurs via the same rails as if the customer made the transfer themselves, and security is assured by the requirement for the customer to input their bank log-in details for every transaction.
Request to Pay consumer authorisation happens within a bank’s app or website, meaning that Request to Pay transactions are protected by bank-level security. This can include two-factor authentication and the Strong Customer Authentication protocols mandated by the EU’s second payment services directive (PSD2), where appropriate. As a result, Request to Pay is extremely secure, reducing fraud and cutting the cost of risk management.
Another step in the digital shift
Request to Pay clearly demonstrates the potential of a flexible payment system based on Open APIs and designed to fit the needs of users in the digital era. It fits perfectly within the industry-wide shift to digital services, providing a more accessible payment solution. It makes sense, therefore, that banks looking to modernise their payment platforms by launching Request to Pay solutions decide whether to adopt the third-party or platform approach.
It is likely that the national and international one-to-many platforms will prove cheaper and more efficient than integrating third-parties, as is already demonstrated in the Nordic and UK schemes. They will also be more easily connected across borders, bringing vital interoperability capable of increasing both the potential and the use cases of Request to Pay.
Despite rapidly gaining momentum today, it will undoubtedly be a few more years before Request to Pay reaches its potential. However, once adopted, secured and linked to digital and mobile uses, Request to Pay will have the capacity to become an international payment model and a viable alternative to current international payment schemes.
Banking Circle is currently working with a range of Banks across Europe on a range of Request to Pay-related projects, including payments platform modernisations, developing API architectures and integrating third-party services. A white paper on the opportunities of Request to Pay can be downloaded here.