Sami Uski explores the benefits of request-to-pay for consumers, businesses and banks.
With Request to Pay (RtP), businesses or individuals can send an electronic request for payment to a debtor account. In contrast to direct debits, RtPs work in real-time and are suitable for single or ad hoc payments. Payment requests can be sent to, and forwarded on, by the payer through multiple channels.
Unlocking new revenue streams
As a consumer, the way you apply for a mortgage, check out on an online store or pay a utility bill via an internet bank have completely different steps. But what if these payment processes could be simplified and completed in one click? RtP enables a four-corner model, where a bank can contact a client or payer via their preferred banking app, be it for a P2P payment, e-payment, utility bill, whether they’re at home or abroad. The consumer can then choose what to do with the payment: check-and-approve, decline, set a date for the payment to selected creditors or automate payments for a certain date.
If several payment flows follow the same process, the bank (or the one offering the consumer the wallet) has gained a central place to offer additional payment services to create new value and provide an even better consumer experience. Banks can also retain old and attract new customers as well as adding even more services that generate new revenue streams. Let’s explore what these services could be.
Boosting consumer experience
An offer of credit is an obvious new service. Rather than using a credit card to make a purchase, what if there are more options? For example, non-card revolving credit or pre-scored loans offered at the point of purchase. The wallet “knows” the payments are due and could offer the customer the option to use the credit now or sign up for instalments to secure the balance for other upcoming payments.
Or perhaps the customer could even receive an insurance offer for the product they are buying. For example, a customer books a flight with an airline company that ceases to exist at the time the flight was due to take off. Normally, this would be a shame and perhaps the customer would lose their money, but luckily the bank offered payment insurance for the flight tickets at the time of booking, and even travel insurance as well.
How could a Bank transform these ideas into live services? They would need a network of business partners, an ecosystem to respond to the needs of consumers. Taking the previous idea as an example, the bank would need a partnership with an Insurance company. Luckily, Open Banking and API’s can solve this technological element of collaboration.
Business benefits too
For consumers and banks the benefits of RtP are now clear, but what does it offer for businesses such as merchants and utility companies? This landscape is fragmented and diverse, comprised of large merchant chains, international corporations as well as small local businesses. Many of these companies still use old ERP systems and services that are not well suited for real-time payment schemes such as RtP.
However, we can see some real ecommerce trailblazers with merchants already leveraging the benefits of RtP such as secure messaging between the consumer and the merchant and giving consumers more control and flexibility with making payments. Or in the Nordics for example, we see a rapid move from card to instant payments which comes down to a better user experience and leads to improved conversion rates. And because RtP operates in real-time, merchants also benefit from the immediacy of funds.
How to make the change?
Still, for the majority of companies lots of changes are needed to harness the benefits of real-time payments. It requires a change in financial processes - a move of liquidity management and daily treasury operations to a real-time 24/7 operation. And it requires new investment to maintain 24/7 real-time payment flows. However, the business benefit could be substantial and automated rule-setting in treasury systems such as VAM (Virtual Account Management) will potentially solve many issues.
Are you ready for RtP?
To summarize, RtP enables real-time payment data flows that create an enhanced customer experience both for businesses and consumers. Due to the unprecedented times we are living in, further digitalization and immediate access to funds has gained even more significance. Therefore RtP is probably poised for mass adoption.