In a rapidly transforming digital payments ecosystem, Request-to-Pay (RTP) provides compelling functionality. From improved customer service to reduction in costs, fraud and friction, the benefits of this new way to request payment initiation are extensive.

SEPA Request to Pay (SRTP), the Eurozone version of this initiative, allows digitalization of the transaction. This gives the provider of goods or services the ability to interact digitally with the receiver, enhancing transparency and facilitating simple and easy reconciliation.

SRTP enhances the end-to-end user experience covering every type of payment - from business to business transactions, business to consumer, consumer to merchant, person-to-person and machine-to-machine.

A New, Real time, Digital Payment Option
In its simplest form, SRTP is a set of operating rules and technical elements including messages that allow the provider of goods or services (the payee) to request payment and for the receiver (payer) to respond directly to the request and then initiate a payment based on the information contained in the request. Using ISO 20022 standards allows the messages to be information rich, carrying details required to support the underlying business interaction.

Following a request to pay, the payer can respond directly to the request, confirming or rejecting the request, providing alternate information on the payment or indicating the payment date. This information can also be included in the corresponding payment, allowing for easy reconciliation and application of funds.

Transforming the Payment Experience
RTP removes a great deal of the friction associated with traditional payment mechanisms by changing the way a payee and payer interact, allowing a digital interaction model underlined with a data rich experience – with the payment element becoming secondary to the interaction itself.

However, the customer experience does not have to change. A business can agree a set of payment terms with a consumer in the same way a SEPA direct debit is mandated. The consumer can agree with their bank that when it receives a request to pay, the bank will automatically make that payment on their behalf if it satisfies a set of criteria as it does for a SEPA direct debit today. The consumer experience does not change. Yet, the business' experience can change for the better, reducing costs associated with exceptions. Rather than just getting a reject due to lack of funds, they could receive a response to the request saying that the payment will be made on a specific date when the bank knows that the consumer will have funds, without the business having to initiate another collection request.

Success Depends on Effective Overlay Services
Overlay services shape how RTP capabilities are put into use. Overlay services facilitate innovation within the payment environment, allowing distinct capabilities to be crafted from the underlying technologies of SCT, SCT Inst, SRTP and open banking.

Overlay services are only limited by imagination and bring value to both the users and providers of payment services. They can provide a range of different experiences, for example, allowing a receipt to be displayed in a digital wallet with a pay now button; a notification at the physical point of sale that the funds have reached the merchant or notification of and initiation of the next payment in a conveyancing chain.

Overlay services can govern the actual payment created as a result of the request. For example, they could provide notification to the payee when a payment has been initiated, a guarantee that a payment will be made on receipt of the request, pre-authorization of a payment when a request to pay is received, or payments in multiple installments based on a single request.

Embrace Innovation
Financial institutions have a unique advantage in terms of customer trust and access within the payments ecosystem. Financial institutions that seize the opportunity that Request-to-Pay provides to better serve their customers, both from a business and consumer user perspective, will establish themselves as providers before other alternative payment players enter this market.

Request-to-Pay, together with instant payments and open banking is revolutionizing digital payments. Financial institutions that have a strategy that looks beyond immediate compliance to embrace new payment methods will have a clear market lead. With the release of the SEPA Request-to-Pay rulebook in November 2020, there will be more significant developments in this space. Stay tuned!