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What is Request to Pay and how does it work?

Request to Pay (RtP) is one of the first outputs of Pay.UK’s plans to deliver the New Payments Architecture.

It’s a secure messaging service that will be overlaid on top of the UK’s existing payments infrastructure as a more flexible way for businesses and consumers to settle payments.

How will it work?

Request to Pay will allow any business or individual wishing to receive a payment, to send an electronic request for that payment to the debtor account.

The request will be received by the payer – most likely via an electronic interface such as a mobile banking app – showing the requested amount and the due date. They will then be presented with a number of choices:

  • Pay in full
  • Pay part
  • Ask for an extension
  • Decline payment
  • Send a message

If the payer chooses to make a payment, the payee will be notified whether the payment is in part of in full and when it has been confirmed. In theory, the channel is ‘payment type’ agnostic, so it could be a Faster Payment, Direct Debit, or even a Payment Initiation Request via Open Banking.

With the aim of real-time payer-payee communication, UK payments could be initiated via Faster Payments and Euro payments via SEPA INST; the new, real-time version of the SEPA Credit Transfer.

To access Request to Pay services, businesses and consumers will need to use a web-enabled application; which will likely be browser-based for corporates and app-based for consumers. The providers of these applications must pass strict accreditation requirements accreditation requirements; such providers must also be registered with the UK Open Banking scheme.

Why does the UK need Request to Pay?

The way we work is changing.  More people are either self-employed or signing up to zero-hours contracts and, as a result, much of the population isn’t earning a flat, predictable sum on the last working day of every month, like they may have done in the past.

In response, the payments industry needs to evolve to meet the changing requirements and behaviours of the 21st Century consumer. As Request to Pay offers businesses and consumers more control over their outgoing payments; it also enhances control and visibility over their cash flow.

Of course, allowing people to delay or part-fund payments is not a completely new concept; many companies already offer customers a degree of flexibility around payment terms (when agreed). For example local authorities are often able to rearrange council tax payments with local residents if they’re unable to cover the cost.

The trouble is, significant manual admin is still required to make that happen. Meaning many businesses cannot support a flexible collections process via Direct Debit or recurring card payments due to legacy processes. Request to Pay will therefore make it cheaper and easier for businesses to offer flexible payment options to their customers via a system that’s fast, secure and simple to use.

More flexibility for payers:

Research conducted by Answer Digital shows 52% of payers would like the option of delaying a bill payment, usually for reasons as simple as matching bill dates up with payday. With Request to Pay making this kind of flexibility available to businesses, there’s an opportunity for businesses to increase customer loyalty whilst increasing electronic payments and migrating payers away from cheque, cash and cards – which all come with high processing costs.

Increased customer loyalty for billers:

Whilst consumers benefit from added flexibility, corporate billers can benefit from improved communication with customers. RtP presents corporates with an opportunity to strengthen relationships with customers by offering a more sympathetic, customer-centric approach to payment collections.

Reduced costs for billers:

Research conducted by Accenture and the Faster Payments Scheme estimates the adoption of RtP could bring savings of 18 – 36 pence per transaction. This comes from an accumulation of factors; switching from paper to electronic billing, reducing time and effort in chasing late payments and increased reconciliation. For large corporates with millions of customers, the potential cost savings are substantial.

Improved reconciliation for billers:

Random payer references often trigger reconciliation-based headaches for billers. With RtP, corporates gain the massive advantage of having the ability to choose and affix a payment reference prior to sending a payment request to a customer. This will make it possible for corporates to automate the process, ultimately benefiting from reduced reconciliation volumes and costs.

Of course, Request to Pay is still being ironed out, which poses a few questions:

  • Is there potential for debtors to see it as an invitation to regularly delay payments or pay the bare minimum?
  • Will this, in-turn, pile-up arrears for creditors?
  • Companies will need to draft up new terms and conditions for RtP users
  • There’s no equivalent to the Direct Debit guarantee in place, which presents issues for debtors looking to reclaim once a payment is made

When will Request to Pay be available in the UK?

With regards to an exact release date, Pay.UK are keeping their cards close to their chest, but state that the service is set to launch this year (2019).

Whilst questions around Request to Pay usage and regulation will no doubt be answered in the coming months, the potential it offers for consumer-facing corporates and their customers is significant.

If it lives up to expectations, Request to Pay will work for both parties; modernising consumer billing to meet the needs of modern workers whilst helping corporates save time, cut costs and provide a solid value proposition for early adopters to attract and retain a loyal customer-base.

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