Request to Pay (RtP) is a concept designed to give greater flexibility to consumers and businesses while making payments. It has also been quoted as being one of the key services that will be enabled through open banking. Request to Pay is intended to improve the control and transparency of bill payments. RtP is not a disruptive technology but is rather an addition to Direct Debit and other existing bill payment methods to give consumers and businesses an additional choice.
Using RtP, businesses & organizations will be able to ‘request’ payment for a bill, rather than sending an invoice. For each ‘request’, customers will have an option to pay in full, pay in part, ask for some more time, communicate with the biller, or decline the payment. The service could benefit a wide range of sectors – from utilities to financial services, government, NGOs and many more. RtP has potential benefits such as reduced frauds, chargebacks, and better information.
A typical RtP system follows the below steps:
Checkout: When a consumer makes a purchase online, they can choose to pay through their bank at the checkout.
RtP initiation: The merchant then sends the purchase details to the buyer’s bank and initiates a ‘request to pay’.
Authentication: The bank confirms with the buyer using an email or SMS.
Approval: The consumer then approves the payment once the details are verified and found correct.
Confirmation: The bank sends a message to the merchant informing them of the successful payment by the buyer. The money in this stage is still on the way.
Payment: The buyer’s bank transfers money to the merchant’s bank. All this happens real-time in a matter of a few seconds.
In the payments & collections space there is a constant competition between physical and digital instruments. While the digital payment & collections methods such as credit card, debit card, e-wallets or other schemes compete, RtP is another addition to the illustrious list that has several benefits for mass adoption.
RtP enables direct real-time access to bank accounts thereby, encompassing a larger audience to transact than the limited users of e-wallets and cards. This is great for a country like India where around 1.2 billion people have bank accounts but no credit cards.
Unlike the percentage commission that comes with other digital modes of payments, RtP may require to charge only a meager amount for the transaction. This is mainly because RtP is seen as a data business rather than a source of direct revenue.
The use of RtP minimizes the opportunity for fraud and chargebacks as the consumer approves every transaction only after verifying the invoice while the bank verifies the transaction.
Real time settlement:
The request to pay design developed using real time payment framework ensures that the merchants receive their payment instantly in real time.
One of the solid features that stand out with RtP is the initiation of payment using social media channels, email or SMS. The banking details need not be shared. This eases the registration process and reduces merchant overheads, consequently also reducing the risk of data breach.
RtP is a significant step towards transforming payments ecosystems in countries like India, China, Asia Pacific, Europe and Americas into a cashless economy. With the advent of cashless economy, more and more merchants are acknowledging and shifting towards the digital modes of payment. Even though cash and checks are far from becoming obsolete, their usage is surely set to become limited.