Request to Pay (Rtp) – The Next Big Step in Payment Technology

Why is Request to Pay such a globally growing trend?
Request to Pay or RtP is currently in the spotlight of the banking and payments industry. But why is this concept growing so popular? Four key factors have pushed RtP to the fore. They are, flexibility, control, transparency, and convenience, for both payers and payees. In fact, RtP packs a punch when it comes to making and receiving instant payments in a more streamlined and trackable manner. Let’s explore RtP and its benefits in more detail.

What exactly is RtP?
RtP is an innovative way of requesting and settling a payment between a payer and payee. It is a secure framework and customers have the option to make a full or partial payment or ask for an extension of the payment date. RtP is a collective term for digital payment requests, where a transaction is triggered after confirmation by the payer.

Let’s take a hypothetical example to see how this works:

John owns a medium-sized business supplying small spare parts to manufacturing companies. Since such payments are not made at the time of delivery, he has his hands full emailing out invoices and sending ‘payment due’ follow up communications. RtP is a boon for John and many other merchants like him, who are struggling with managing and tracking their dues.

The secure RtP framework usually sits on top of an existing payments framework and can be used via an application provided by an RtP service provider or a bank. So, all John needs to do is open his RtP app and send a ‘request to pay’ message to the people who owe him a payment, along with the invoice. It’s simple and convenient.

Now, Thomas is a manufacturer who has an outstanding bill to pay to John. When he receives John’s message via his RtP app, he is given the option to accept the request that will trigger the payment right away. He also has the option to reject the request, request a payment extension, or even make a partial payment.

In this way, John can easily keep track of his billing and payments. Plus, if Thomas decides to accept and pay right away, John receives the payment in his account instantly. Unlike checks and Demand Drafts that must first be submitted to the bank, with RtP there is no delay in processing the payment.

The payer benefits too. If Thomas doesn’t have sufficient funds to pay in full, he can make a partial payment. If he has already made the payment by another method and wants to avoid making a double payment, or if he believes there is an issue with the bill, he can decline to pay. This flexibility offers much-appreciated control, helps avoid confusion, and reduces chargeback disputes.

What are some of the benefits of RtP?

Instant and assured payments with no processing delays

Many small and medium-sized companies struggle to keep their businesses going. The need of the hour is to provide them with a convenient solution that enables instant clearing of payments via a real-time payment network. RtP is also ideal for business owners who count on assured incoming funds to fulfill an order. For instance, a party caterer will require a partial payment in advance, to buy the ingredients required to prepare a meal. For such a business, accepting a check or Demand Draft is not an option, as the instrument may not clear and will take time to process. With RtP, if a customer declines the advance payment, the caterer can cancel the order and avoid a potential loss.

Greater savings and more business for merchants

When using RtP, merchants don’t have to pay significant amounts as fees. Therefore, they enjoy greater savings, some of which can be channeled into benefits and discounts for customers. Happy customers are easier to retain, and good offers attract more customers, resulting in more business for merchants.

Better fraud and risk controls and reduced disputes

With RtP, a payment is only triggered if the customer approves the transaction and authenticates it with their bank. This leads to a reduction in fraud and chargebacks, as each transaction is approved by the payer.

Easier transaction reconciliation

The transaction data captured when an RtP is initiated and the payment is approved, ensures a perfect match between the purchase and payment. This enables faster and easier transaction reconciliation.

Some interesting use cases for RtP

To make recurring payments and bill payments

A home loan EMI or a monthly phone or electricity bill, can instantly be paid with RtP. When an invoice is raised, the payee initiates a request to pay that is sent to the payer. On logging in to their mobile or web banking environment, the payer is notified that the request is awaiting a response. After reviewing the details, the payer can choose to authorize the payment right away or reject the payment if there is an issue with the bill. This is better than a direct debit. For instance, a payer might have instructed their bank to directly debit the amount when their electricity bill is generated. However, if there is a mistake in the bill that the payer is not aware of, then the amount is paid out anyway and the payer may have to run from pillar to post to get a refund.

Using RtP at a Point of Sale (PoS)

RtP can be used to make an in-store payment when a customer checks out shopping items at the PoS counter. The payer (customer) can scan a QR code with their phone, which triggers an RtP via the store’s RtP service provider. The payer then receives an RtP push notification and opens their RtP app on their phone to accept and authorize an instant payment into the store’s account.

Making payments for filling up or charging vehicles at petrol stations

Every vehicle has a unique vehicle registration number or license plate number that can be used to identify a customer. After the vehicle owner completes a one-time registration, image recognition can be leveraged to capture the vehicle’s license plate number at the pump or charging point (for electric vehicles). This can trigger the release of the pump. Once the filling up or charging is complete, an RtP can be sent to the customer.

Request to Pay variations around the globe

Request to Pay framework, UK – Launched by pay.UK in May 2020

Request to Pay in the UK is an API-driven messaging service framework that lies on top of the existing payments infrastructure (Faster Payments), and helps companies and individuals manage and settle bills securely and with a great deal of flexibility and control. When using this service, a request to pay message is sent to the payer by the payee, via a secure network. Payers can choose one of the following five options:

• Pay the full amount
• Pay in part
• Request an extension
• Decline payment
• Send a message in response to the bill

SEPA Request to Pay Scheme, Europe – Launched in November 2020

The SEPA Request to Pay scheme is similar to the UK’s Request to Pay service framework and offers the same speed, control, and flexibility in bill payments. It is a messaging functionality that allows a payee to request a payment from a payer through their RtP service provider. The scheme offers options to accept and pay immediately or later. Payers can choose one of the following four options based on their preference:

• Accept now: The RtP is immediately accepted by the payer
• Accept later: The RtP can be accepted later by the payer
• Pay now: The payer must make the payment immediately, at the time of acceptance
• Pay later: The payment is initiated later than the time of acceptance

BPAY – Australia

BPAY is a the RtP bill payment service that is available in Australia, used by over 60,000 merchants in the country to make payments more convenient for customers and enable easier reconciliation. Built on the New Payments Platform as an overlay service, BPAY allows merchants to send bills and statements directly to customers, in bulk, to their banking applications. In turn, customers can quickly and instantly make payments directly from their banking apps. The service is simple and secure and offers a range of APIs to retrieve biller details, validate payments, and generate unique Customer Reference Numbers, to simplify the process of paying bills.

Conclusion

To conclude, RtP is the way forward in payments. To meet the needs of customers, banks and financial institutions must look at providing their own RtP applications or configuring their existing online banking apps for RtP.

Narayanaswamy aka PK, an Associate Business Analyst, has over 7 years of experience, working in the banking, cards, and payments domain and has previously been a consultant for an eCommerce payment solution. He has a deep interest in next-generation payment technologies. Outside of work, PK enjoys hiking and boxing. He also participates in public speaking events.

If you have any questions on RtP or other payment technology services, you can email tuhin.mahapatra@synechron.com