Having just attended the Pay.UK (formerly known as New Payment System Operator (NPSO)) progress update event, there seems to be a good amount of excitement, anticipation and intrigue around the launch of the New Payments
Architecture (NPA) and associated End User Overlay Services –
Request to Pay (RtP) and Confirmation of Payee (CoP).
The ramifications of these launches could be significant, especially for the financially disenfranchised who have traditionally haven’t been offered utilities for instance by direct debit, owing to poor credit ratings, and have faced punitive and outdated
pay-as-you-go utility charges.
While Pay.UK has progressed well in terms of launching the RtP sandbox and draft API specifications, one of the key gaps identified by a member of the audience was the lack of a well-defined business case that would compel the industry to drive adoption
of RtP. The audience member asked the panel some very simple questions - Who should pay for the RtP service? Who can be billed for using the service? What are the incentives for the participants?
While Pay.UK is not directly responsible for creating the business case, we believe they can certainly influence the adoption rate by supporting innovation driven by RtP. The challenge for the payments industry is striking the right balance of the reduced
friction introduced by these services vs increased value for consumers. Ultimately the aim must be putting more control and better management in the hands of consumers and billers to the benefit of everyone involved in the payment eco system. RtP is a very
clear example of this and surely just the tip of the ‘userberg’.
Here are some good examples of use cases that we feel can help define the RtP business case for payees, payers, payment service providers (PSPs) and third-party providers (TPPs) and opportunities for new revenue streams.
For the RtP initiator- Payee/biller
For large-scale billers and corporate customers, RtP can be a game changer and provides a clear opportunity to convert their pending paper invoices into electronic payments. As the bulk of invoices are still generated and shared using
paper, SMEs as well as large corporations face huge challenges and costs in the process of tracking these invoices, ensuring timely re-payment and reconciliation. The current process is very slow, prone to errors and leaves a lot of cash being stuck in
the payment pipeline.
A bulk RtP file submission service can allow these corporates to submit all their pending invoices in the form of RtP requests containing the amount, currency, preferred method of payment, due date and the invoice itself. As their outgoing RtPs get converted
to incoming payments, there would be a need to reconcile those payments (full or part) with the original RtPs and corresponding invoice. This is one key service that corporates would be willing to pay a small service charge for.
There is no doubt that RtP will increase the convenience of paying and receiving money between individuals. However, customers would expect for the RtP service to be free of charge. To maintain their competitive edge, incumbent banks as well as new age financial
services providers must offer RtP service to ensure an improved user experience and absorb the associated costs as table stakes for staying in the business.
For the RtP receiver - Payer
Individual customers, who dislike Direct Debits due to lack of control over their payments, would welcome the ability to manage all their bills via RtP. They will now be able to pay ‘just in time’ before the RtP due date expires as well as convert a large
payment in to smaller chunks and pay over several instalments. This would incentivise the DD sceptics to embrace digital payments while maintaining complete control over their finances.
Corporations too would welcome the ability to pay ‘just in time’ for the goods and services delivered. Retailers would welcome the idea of customers paying via RtP at the point of sale terminals as the funds would be credited immediately and be available
for further purposes.
For the repository provider – PSPs, TPPs
While the above are all strong business cases for PSPs and TPPs to provide repository services, there are additional features / services that can be provided by banks and TPPs to improve their brand recognition, customer loyalty, increase revenues and share
of customer wallets.
Banks can provide fee generating micro loans (like payday loans) to customers that are falling short on cash and have a fast approaching RtP deadline. Digital banks like Revolut are already providing small loan amounts and this could fit very well
with the RtP proposition.
Additionally, banks and TPPs can provide aggregation services using open banking APIs (e.g. Yolt, HSBC Connected Money App, etc.) and provide a list of all RtPs associated with all the accounts of the customer. Such a feature would allow for better cash
forecasting for the customers – ‘balance after bills’, while providing the PSPs and TPPs with rich data about the consumers spending habits, preferred shops and services, etc. Such data can be leveraged to cross-sell new / preferred products and services,
create new revenue streams and build loyalty profiles of the customers.
Race to the top
The impact of digital disruption is now stronger and more visible as incumbent banks begin to take the hit in terms of revenue and customer base. New entrants to the UK banking industry now control 14% of the overall banking revenue, reports
Accenture. These new entrants are highly tech savvy, adaptable to change and able to offer new services very quickly. It is therefore crucial for ASPSPs and TPPs to offer customer focused Overlay Services quickly and uniquely compared to the best of the
So what new innovative services is your organisation planning as a result of RtP?