Request to Pay (RtP) is a new proposition designed to give consumers and businesses greater flexibility when making payments. It is one of a number of new propositions the Payments Strategy Forum wishes to see adopted by the market; and is part of its vision for the future of payments in the UK. I am very passionate about RtP because I believe it brings a number of benefits for users. I’ve been working on it for 18 months, building out the customer journey and talking to corporates, banks, and technology companies about it.
Fundamentally, RtP enables billers, or anyone that wishes to receive a payment, to send a request for that payment to the payer (a consumer or a business). The request is sent electronically and received by the payer, most likely in an app. The payer can see the requested amount and the due date. They are then provided choices on how much to pay, and when to pay, or even whether to pay at all. Confirming back to the payee then kicks off a process to collect the payment from the payer’s account. This can be via Direct Debit, or a Payment Initiation Request via Open Banking.
The benefits of RtP are as follows:
1. Flexibility for payers
Consumer research conducted by Answer Digital showed 52% of payers would like the option of delaying a bill payment. As an increasing number of workers join the gig economy, income patterns are becoming more irregular. Being able to choose when they pay is very important. Often this is simply delaying the date of the payment by a few days to match their pay date for that month. Enabling flexibility of payment date through RtP would increase the usage of electronic payments, migrating payers away from cheque and cash.
2. Reduced cost for billers
Market research conducted by Accenture and the Faster Payments Scheme estimated a saving of 18 pence to 36 pence for billers, per transaction, as a result of RtP. Cost reductions come from migration to electronic billing from paper, reduced time and effort in chasing payments, and increased reconciliation. For large billers with millions of customers, that becomes a substantial cost saving.
3. Increased loyalty from customers
consumer research from Answer Digital showed customers would be 50% more loyal to a brand that offered RtP than one that didn’t, even if the other brand had better pricing. Flexibility and control are driving this loyalty mainly, but it is also the opportunity to flag financial concerns which interests both consumers and billers.
Billers have expressed to us that they actually prefer to know sooner rather than later if a customer can’t pay a bill. This prevents the initiation of an expensive customer chasing process, which neither the payer or the payee enjoy. Instead billers can start having the conversation with payers that are in trouble about instalment plans and more managed usage of the service. Through RtP payers can initiate a request to speak to the biller and have a conversation about the payment, rather than just ignore the bill.
4. Positive friction
It is still the case that the majority of bill payers like the ease of Direct Debit. Payments get made automatically, and payers don’t have to worry about them. However, even consumers who normally have sufficient balance in their account may occasionally suffer a failed payment if an unexpectedly large expenditure has reduced their balance beyond normal one month.
Receiving a payment request that can be seen against the current balance in the account enables the payer to take corrective action if there isn’t sufficient money available. Seeing payment requests also gives re-assurance that the money being collected is of the correct magnitude and unusually large payments aren’t being taken in error.
5. Building a new ecosystem platform
of the most exciting aspects of RtP is its potential to act as a new ecosystem platform. RtP connects billers/merchants and payers (consumers and businesses). It also connects banks, either as the mechanism through which payments are made, or as the facilitator of the original request.
Research conducted by Answer Digital showed that consumers overwhelmingly trust apps from their bank over any other brand. Banks are, therefore, well placed to offer RtP services to their customers. Connecting these three parties enables the potential to exchange additional information in the future. Consumers could receive discount vouchers electronically from merchants. Banks could offer financing options from payers struggling to pay bills, not to mention invoice financing to merchants. Bringing all three parties together across a single platform enables new services to be created that benefit both payers and payees.