Request to Pay – What’s behind the innovative payment method?

This is sufficient reason for us to examine the rationale behind these payment methods, which are sometimes not entirely novel, but still largely unexplored. To achieve this, we have explored the concept of ‘Request to Pay’ and investigated the key issues surrounding RTP.

What is the meaning behind the expression, and what is the origin of the term “Request to Pay”?

As the name Request to Pay suggests, the principle is based on a request for payment from the payee to the payer. The request may comprise various details,including but not limited to the amount, due date, or purpose, enabling the recipient to actively request a payment. This, while allowing the payer to determine the timing and manner of payment, subject to certain conditions.

The SEPA Request to Pay (SRTP) Rulebook of the European Payment Council, which entered into effect on 15 June 2021, has already enabled the practical implementation of Request to Pay. This encompasses a multitude of operational regulations and technical components that enable the payee, as a voluntary participant in the process, to request the initiation of a payment from a payer through the SRTP scheme.

The concept encompasses numerous physical and online applications. Since the SRTP framework has already reached a highlevelofmaturity, minor adjustments have only recently been made. This is due tothe upcoming Instant Payments obligation. This renders it a payment method. that operates in real time, enabling immediate, liquidity and prompt handover and dispatch / of goods.

How is the payment process handled?

However, many business processes are involved, the process can be broken down into four steps. The steps 2 and 3 are the most important parts of the Request to Pay.

1. The actual transaction: The parties involved in a transaction or purchase have reached an agreement regarding the conclusion of the transaction and wish to proceed with the transaction through RTP.

2. Request to pay: The parties involved in the payment transaction are uniquely identified to enable the transmission of the payer’s identifier and their RTP service provider to the payee. The Request to Pay is now being transmitted with all essential data from the payer to their RTP service provider, which in turn transmits the message to the payer’s service provider.

3. Acceptance / refusal: The request is presented to the payer by their service provider on the agreed channel or device e.g., smartphone, web browser, etc. The acceptance or refusal of payment by the payer is sent back to the payee via the respective RTP service provider.

4. Payment: If the request is accepted, the amount owed will be transferred from the debtor to the creditor. Multiple models are possible, from an immediate value date using Instant Payment to a later payment in instalments.

Steps 1 and 4 are not directly associated with the Request to Pay process, similar to the delivery of the transaction object upon acceptance of the payment request. Instead, they represent the underlying transaction and the payment process chosen for it.

The subsequent figure depicts the procedure utilizing the 4-corner model, encompassing the four parties involved. In this model,both the debtor and creditor have their own RTP service provider. In practice, it is possible to employ models wherein both parties involved in the transaction have a joint provider. If this is the case, we refer to a three-corner model. It is important to note that the diagram demonstrates the information level of the Request to Pay process. Therefore, the arrows shown in green represent the process for initiating the request, while the red arrows show the payers response and the associated status report. The subsequent payment level, including the banks involved in processing the payment, is not displayed.

What are the specific use cases?

E-Commerce: If an online purchase is completing, Request to Pay can provide the shopper with an additional payment option. This option allows them to pay directly via RTP using a payment inquiry in their bank’s familiar online banking system. This improves the user experience that is so significant in online business, and, if the customer can conveniently choose between “Pay Now” and “Pay Later“ in the payment request.

E-Invoicing: Companies that regularly send invoices to their customers can use Request to Pay to improve the traceability of payments and manage cash flow more efficiently. Payers also benefit from this form of invoicing, as they conveniently receive a payment request as a push message in their banking app,so that invoice and payment are directly linked. This procedure is applicable for both one-time and recurring payments.

Physical payment process: Request to Pay can be integrated as an additional payment method at the point of sale via the retailer’s PSP. For example, the payment process can be carried out by opening the NFC-enabled smartphone or by scanning a digital QR code. This provides a platform-independent option for digital processing of the transaction without having to maintain an expensive card reading infrastructure. Furthermore,the transaction can be expedited by combining it with instantaneous payments.

Money transfer: Request to Pay can also be used for peer-to-peer money transfers, where friends or family members can request money without having to exchange complex banking information.

What are the advantages of Request to Pay?

Flexibility & user-friendliness: RTP enables payment recipients to create flexible payment requests with customised criteria. Byadjusting the framework conditions in this manner,both the recipient and the sender can exert controlover the duration and nature of the payment. The customer also benefits, from the simple processing, for example via the online banking of the house bank,, and mainly smaller merchants benefit from the increased flexibility, of not having to provide card terminals to enable cashless payment.

Security: As Request to Pay is an active payment request, payment details are presented clearly and transparently. This significantly reduces the risk of payment errors and fraud attempts. Additional security is provided by the initial identification process and the immediate value date on an IP-connected application.

Automation and reduced costs: Companies can integrate Request to Pay into their systems to automate the payment process. This approach results in a reduction of time and resources required for the management of invoices and payments. Cost transparency can improve your negotiating position with other payment providers.

Conclusion:

The utilization of Request to Pay as a messaging function, when paired with a cutting-edge payment method, presents a significant potential for a diverse range of applications. Thanks to its high degree of flexibility, security and automation, the process can make payment transactions smooth for consumers and companies alike.

On the retail front, there is a significant level of interest in the process and a corresponding increase in demand. Although there is still a great deal of hesitation among banks. The advantages are evident in this regard as well: banks are directly integrated into the payment process and can incorporate customer loyalty elements by offering combined additional services, such as archiving Request to Pay invoices.

Clearly, the trend towards contactless and digital payment methods is evident. However, even though there are already advantages, Request to Pay has not yet been able to fully benefit from this. This situation may now undergo a modification, particularly with the forthcoming IP obligation, thereby ensuring that RTP possesses the optimal prerequisites for its integration into the digital payment process in the forthcoming years. Merchants and banks should therefore familiarize themselves with the process now and take steps to expand the payment options for customers with Request to Pay.