Request to Pay - Main Benefits for Users and Fintechs

Sabrina Akramova , Editor & Content Manager at Financial IT

29.03.2022 12:45 pm

#fintech #payments #PayUK

Request to Pay (RTP or R2P) is a novel real-time payment channel that has the potential to assist merchants, banks, acquirers, and billers. It is rapidly gaining popularity as a value-added service for real-time payments as it expands globally. Several R2P schemes including PayUK and the European Payments Council already exist, however they are not fully operational. As PayUK estimated that this service can save the UK economy over £1.3bn a year, what do users and fintechs need to know about this new technique of seeking payments?

What is Request to Pay?

Request to Pay is a type of "pull payment" in which a payee requests a specific transaction from the payer. On their mobile device, payers receive a digital request to pay, typically via a banking or fintech app. If accepted, the payer initiates a real-time credit transfer to the payee. This technology is described as the next stage in real-time digital payments, enabling shops, billers, businesses, and even individuals to collect payments.

The scheme streamlines the end-to-end process by sitting between an underlying economic transaction and the payment itself. It gives the payer increased control and enables the biller to balance payments upon receipt. The framework is not a one-size-fits-all solution. This means that payment service providers, fintech, and enterprises can collaborate to give clients with Request to Pay.

Is Request to Pay safe?

There are multiple reasons why Request to Pay is secure. To begin, a Request to Pay is sent to the payer's proxy payment address, which strongly protects sensitive payment data. Following that, the payer determines whether to approve or deny the payment, then utilizes a confirmed bank application to complete the transaction.

Both the payee and the payer value convenience. After all, payment is secured with a single click. Another advantage is the consumer's proclivity for direct payment, which makes the conversion rate increase due to simplicity of use. The payer may be able to pay fully or partly, or deny payment and initiate communication with the payee, which gives the payer greater control.

How and Where is RTP used?

Request to Pay is available to consumers, retailers, billers, and companies. Request to Pay is utilized in a variety of everyday payment scenarios, including eCommerce, mobile commerce, bill payment, social payments, and in-store payments. Request to Pay can also be used for business-to-business (B2B) payments, allowing businesses to request payment from other businesses.

The necessity to use Request to Pay serves a variety of purposes. RTP can be used by both large and small enterprises for a variety of applications, including bill payment and eCommerce and mCommerce transactions. Request to Pay is a separate overlay technique used in the United Kingdom and Europe that enables payers to select their preferred payment method, most frequently SCT Inst or SCT.

The user path is straightforward:

It sends the payer a Pay Request.
Through mobile banking or fintech apps, the payer (customer) receives the request.
As a result, the payer may approve, deny, or defer the request.
The payer submits the payment in advance of the invoice's due date, using their preferred form of payment.

Implementation of Request to Pay across the globe

Consumer and commercial banks must upgrade their systems to meet the standards of the local plan in order to implement the Request to Pay service (if available in your country). Consumer banks' customers must be able to approve or deny a Request to Pay communication. Receiving banks and those that facilitate business-to-business and business-to-consumer transactions will need to support the Request to Pay message.

Although Request to Pay implementation models can be different to some extent, implementation of RTP is similar across the globe. In India, Request to Pay is implemented on top of real-time payment rails. Other countries, including the United Kingdom and Europe, employ the Request to Pay overlay strategy. A direct approach, such as the one outlined in the European PSD2 "Payer – Payee direct model," takes advantage of open banking without relying on a centralized Request to Pay structure.

Why is Request to Pay gaining popularity?

Request to Pay is growing popularity as a result of real-time payments' global success. Request to Pay is a novel digital function designed to improve the consumer experience. It is safe and secure, and it provides consumers and businesses with increased control and visibility. Additionally, it is considered to be less expensive than alternative treatments, minimizing users' overall expenses and dangers.

Merchant benefits:

No chargebacks with irrevocable payments
Transaction fees: fixed and low
Faster than alternative payment methods
Error-free reconciliation using personal payment references eliminates fraud risk
NRT processing using APIs
Single, pan-European solution: available to all Europeans with bank accounts.

Consumer benefits:

Anyone in Europe has a bank account
No need to register or set up
Authorization using the consumer's bank credentials
Strong Customer Authentication eliminates fraud risk (SCA)
The payment initiation service provider is Deutsche Bank, a known European leader (PISP)

Who benefits from Request to Pay?

Consumer banks provide clients with a modern, frictionless payment experience, as well as increased control and freedom over their payments, through Request to Pay. Request to Pay enables new use cases, and consumer banks can earn revenue through interchange (in markets with regulated pricing), government incentives (in markets where regulators and governments encourage banks to adopt), and collaborations with fintechs, large technology companies, and social giants. Additionally, Request to Pay is extremely secure, reducing fraud and hence risk management costs.

Conclusion