Cash or Card or ??

There are more chances that you might have faced with that famous question when you stand in front of a supermarket till for making a payment - Cash or Card? well, there is going to be a possible 3rd option soon which I believe will circumvent the 2 known options. So, what is the alternative payment option -whereby there will be no cash, no card, just a smartphone and an app that will enable a direct payment from your current account to the supermarket account probably in real time if the journey is frictionless. (A2A payments).

The 3rd option is 'Request to Pay' -not too far away because there is a major hurdle to jump! most supermarkets already have invested heavily in card machines to collect payments from you. The product is not new, it's called Request to pay around the world - the (payee) supermarket is requesting the payment from you (payer), the payer accepts and pays now or later depending upon the financial position. There are countries that currently use R2P in the more peer-to-peer segment. e.g. Tikki by ABN AMRO Netherlands - Tikkie is an online payment app that allows you to forward payment requests to people via WhatsApp, or pay through a QR code and Pay it the similar version that is introduced by Natwest in the UK. The volume seems to be ever-growing which is an indication of the adoption rate by the consumer, which eventually will result in more banks starting to provide R2P services. 

There is going to be a big clash predicted between Card payments and Alternative payment options such as Request to pay. The merchant has to invest in the card machine, pay fees and commission to the provider whereas R2P eases the approach whereby anybody with a Smartphone is a merchant, and can now collect payments from the consumer. The R2P can be a low investment option for merchants because the payments leverage the existing payment rails for the Account to Account money movement, unlike cards. It's worth waiting and watching this space because Cards are also building a similar request-to-pay proposition within the Cards network.

The use case for R2P is beyond peer-to-peer or merchant payment or micropayment segments, there is an elephant in the room - B2B and B2C payments e.g. Corporate treasury payments, e-invoicing, Government payments, etc. The B2C use case of utility payment use case is an even stronger proposition to be challenged by the R2P because we know direct debit is a bit clunky. I am a big fan of the existing Direct debits but once set up there is little chance of any change in the terms that are frictionless for the everchanging consumer needs. This is where R2P comes in giving enough power in the hands of consumers to pay now, pay later at a convenient time or pay in 3 or 4 options. Additionally for the biller, there is dialogue available with the consumer which never existed.

The Bpay in Australia is one of the best live examples of the utility bill collection based on the NPP real-time payment where the utility bill company and consumers are exchanging secure messages and payments under the secure request to pay flavor which supports mandates. US, UAE, Europe, Nordics, UK, and Asia pacific all have their versions of Request to pay to focus on the biller payment segment because of the natural transition and closeness to the peer-to-peer model. the number of payments originated from the mobile phone app and instant payment rails are two basic infrastructure that requires the domestic consumer payment segment. The e-commerce or m-commerce where the shopping on the super apps by the Millenials is a growing market can also start providing the payment in 3/4 options directly to the consumer without needing additional 3rd party help to provide the famous/infamous BNPL payment models.

The B2B will be the next step in the adoption process, the e-invoice adoption is being mandated in some countries to address the VAT leakage. The Governments have started to realize the importance to address the indirect tax that is missed due to the lack of infrastructure to adopt e-invoicing and reporting of the VAT by the Small and medium-sized corporates. please refer to the previous Article about the amount of VAT leakage faced by governments.

So what is the issue at the moment for the adoption of R2P by the Banks?

The answers will be familiar to most of us, there is an overload of regulatory changes consuming the bank's resources to support ISO20022 which by no means is not a small change to a bank of any size. There is an ever-growing technical demand to upgrade the infrastructure to support the ISO20022 formats which is a contributing factor to products like Request to pay to sit along these changes. The R2P is built on ISOformats in most of the schemes around the world. All we need is clairvoyance to see where the business is heading and invest in the rightful strategy. It's time for the banks to 'request to pay' budgets strategy to implement request-to-pay solutions! As the purist say in the world of payments, the status quo is a threat.