Insights

RtP Promises a Payment Revolution With a Impactful Value Proposition

Praveen Prabhakaran, Head of UK; Tanveer Mohammed Aziz, Head of Innovation; and Imran Ali, Sr. Payment Analyst

Pay.UK recently launched Request to Pay, a solution that helps businesses offer customers flexibility in how they manage their bills. RtP connects businesses with individuals via messages, establishing a formal communication channel even before problems arise with payments.

We see RtP as a great opportunity for the Government, the High Street, businesses, and other large utility providers to provide much-needed flexibility for their individual and small business customers in managing the finances, especially in the backdrop of the current pandemic and the emerging new normal post-pandemic.

The market for electronic bill payments is huge (businesses will generate 27.7B B2C electronic bills by 2024), and providing flexible payment options via messaging will soon become a major competitive advantage, especially for first movers.

RtP is estimated to benefit the UK market by £1.3 billion per annum, saving businesses between 18p to 36p per transaction, according to the Economics of Request for Payment Report by Accenture and Faster Payments.

In addition, the UK only needs to look to India, where the UPI standard, a centrally managed infrastructure, via APIs and exchange messages with other parties, has made possible such payments for years. Third-parties, such as Google Pay, WhatsApp, Amazon Pay, and more, connect via API to UPI to send and process payment messages. More than two billion transactions were conducted via UPI in October 2020.

RtP will revolutionise the way consumers can make payments. Here are five benefits of your business enabling RtP:

Response options

RtP enables the payer options when receiving a payment request. Each message contains the amount, date to pay by, who to pay, and an optional receipt or bill. The recipient has options upon receiving it, depending on their specific means. They can:

1. pay in full,
2. decline payment,
3. part pay,
4. ask for more time, or
5. contact the payee.

Direct intelligence

Instead of mailing bills to customers who may lose them or respond late (or never at all), a mobile invoice increases the odds of an immediate response, helping organisations better understand individual customers’ situations and provide leading indicators for future cash flow.

Improved reconciliation for businesses

Since the payment automatically carries the reference information in the original request from the payee, the recipient reduces costs of managing receivables and eliminates the potential for errors like misassigning invoice numbers to the wrong customer or inputting the wrong amount. Businesses spend £4.4 billion are spent every year in the UK to collect money owed.

Increase in timely payments

Currently, 2.3% of invoices in Europe are never paid. Simply put, existing means for bill collection can delay payments, even for people who wish to pay and on time. When a customer receives a paper bill, they either have to find their cheques or log onto a website where they may not remember which email address or password they used. Increased friction decreases the likelihood of timely payment. Making it easier for customers to instead pay through a few taps on their phone through their bank account, card, PayPal, PayPoint, and others will likely lead to quicker payments.

Competitive advantage

Businesses ignore RtP at their peril. Research shows consumers would be 50% more loyal to a brand offering RtP to one that doesn’t. As it is only a framework, businesses can choose to continue business-as-usual. But they risk losing customers to competitors who not only embrace this technology and protocol but actively build solutions on top of it to provide a more enriching experience for their customers.

Implementation

To support both the messaging standards, as well as new processes to manage requests for more time from payers or part-payments, companies will have to make back-office technical and operational changes. With large systems processing bills for thousands, or even millions, of customers, you cannot underestimate the impact of adoption.

Companies have several options in implementing RtP that allow them to reap the benefits and mitigate the cost impacts. The UK RtP model is based on three types of providers:

1) the Biller app,

2) the Payer app, and

3) the Repository.

The Biller app is the software solution that enables the biller/payee to initiate the payment request. This would be integrated into the payee’s ERP system and ensure the request is sent securely and as per the approved message standard. The Payer app is the software solution the payer uses to view the request and select a response. It is also the mechanism through which they can make the payment. The Repository sits in between and facilitates the transfer of messages between the Biller app and the Payer app.

Summary

RtP adoption in the UK depends on two key factors: the number of companies offering it and consumer uptake. There is a real cost for implementing RtP, so organisations must make a strong business case for implementation and adoption.

The UK has laid the groundwork for RtP. It now requires providers to come to the market with their solutions, and for companies to offer them to their customers. Looking forward, payer apps could expand to offering not just basic RtP functionality but additional services such as budget management, central storage of bills, lending, investment of spare funds, and seamless switching of utility companies. UPI in India has shown when the market offers a service like RtP consumer uptake is high. The UK can now build on the foundations and offer consumers greater flexibility and control.

Innovation is expected to continue. In parallel with RtP, the European Payments Council (EPC) has developed the European framework and is working with the EBA on the European rollout. The UK and European delivery methods differ. The UK model supports third parties offering the service, whereas the European model is centered on all messages flowing through the banks. Eventually, Pay.UK will release a New Payments Architecture (NPA), a thin clearing platform to which a range of third-parties can connect via APIs, continuing to provide innovative services.

In our next blog, we will look at how the Cost of Collections can be optimised using Request to Pay.

To learn more about Request to Pay, download our brochure here.