Having looked at Pay-By-Bank in my previous post I thought it would be useful to look at another new payment innovation Request to Pay. This promises to be revolutionary new way of paying bills over the old Direct Debit (DD) that we all love or hate for different reasons.  This is proving to be a very popular method of payment and can be found under different names across the world: RTP (UK), Request 2 Pay or R2P (Europe), Request for Payments (US), Collect (India).

To appreciate the benefits of Request to Pay let’s first understand the benefits and drawbacks of the good old DD which is the current method most people use to pay their rent, gym fees, utility bills, mortgage, or other fixed regular outgoings outside of standing orders.  Many people use direct debits as they are convenient - kind of set up and forget. This is normally fine for most people as long as the regular payment method is meeting its purpose and there is enough money in the account. However, with today's escalating costs especially utility prices for gas and electricity this is causing concern in many households. Will they have enough in the account for the DD to through? Or are they paying enough with their DD to cover their costs or is utility company overcharging through the dd to cover future bills. Recently the BBC reported that the Government has warned the energy firms over hiking direct debits. A recent article in The Manchester News highlighted someone whose gas bill soared from £250 to £1,320 per month!

When you set up a DD, you tell your bank or building society to let an organisation take money from your account. The organisation can collect however much you owe them. But they have to tell you in advance (usually ten working days) how much they'll take, when, and how often. This often causes people to worry about losing control.  What happens if you miss the message/ letter? You have given permission to a third party to raid your account as and when they want for whatever amount they want. The benefits are that you are able to kind of set it up and forget it…

Is there an alternative that cancels the negative aspects of the DD, yet keeps the positive aspects?  The only other option the standing order is a rigid product giving all the control to the payer and is quite cumbersome to amend. Creditors don’t like it, as it gives the debtor too much control.

Welcome Request to Pay. The reason I and many others like it is that it puts the payer (consumer) in control and gives them options of how much to pay. No more sums of money going out of your account – you decide what you will be paying each month (period). You are the boss! Request to Pay isn’t a new payments rail at all but a specification and messaging service able to sit on existing payment rails – most often credit cards and faster payments systems.

With RTP a payee initiates a request for a specific transaction from a payer. The system provides a digital request that the payer can receive on their mobile device or computer. This could arrive on a mobile banking app, or via a third-party FinTech. A payer (customer) can log in and select from a range of customisable options for their payments: accept, amend, reject, delay to a later date, or assign to a separate account.

For once all the parties in the transaction can end up as winners! The payer has more control they are able to accept, amend or reject the payment request. When the payer approves the payment, a real-time transfer is initiated to the payee.  So the payer decides how much they can afford to pay and the balance is added to the payer’s outstanding balance.

For the banks under threat of being more and more marginalised by PSD2 and the rise of the FinTechs, working with suppliers, they can become the payments hub for their customers, offering a richer and deeper experience. Building a stronger relationships means customers stay longer.

Further, adopting Request to Pay capabilities can also benefit payees. Supported by instant payment schemes, payees can improve conversion rates and receive immediate funds, rather than rely on direct debit transactions or other, slower methods of payment.

Request to Pay would introduce another payment option to complement Direct Debit offering flexibility while avoiding methods with high processing costs

Looking at the Request to Pay website for providers of Request to Pay Services to End Users – only shows Mastercard.   The only provider of technical solutions to service providers currently listed is answer pay

In conclusion, it looks like a request to pay is a very interesting innovation and has benefits for payers, payees, and banks. It’s certainly worth looking into for your business if want to give your customers more choice as to how and when they pay you – and thereby give you a higher conversion rate on sales and lower rates of defaults.