Request to Pay has the potential to change the full scope of payment behaviour from instore, online, Business to Business and Business to Consumer. While many of the enablers are already in place, new solutions are required to reach the full potential benefits that Request to Pay offers.
In its simplest terms, R2P (Request to Pay) refers to schemes that trigger payments from bank accounts following a request for payment sent from a requestor to an approver. In contrast with Direct Debits, R2Ps are real time and suitable for single or ad hoc payments. Payment requests can be sent via multiple channels and further forwarded by the payer through a variety of communication channels.
R2P offers an upgrade of the widely used Electronic Bill Presentment & Payment (EBPP) system, enabling the payer to approve or decline the requested payment in real time and choose the payment method that suits them. R2P offers improved transparency and control for the person receiving the payment request.
Danny Pedersen, Senior Product Manager at Nordea, says: “R2P is first and foremost a concept which importantly is also able to offer instant, real-time and account-to-account payments and moves a long way beyond the traditional invoice as we usually know it. In the future, R2P can penetrate and leverage payment processes across different segments adding a dynamic aspect of instant, real-time payments made directly from a person’s account.”
Tino Kam, Head of Payments, Liquidity Management and Corporate Channels at Nordea, says: “It has already become the norm for authentication apps such as BankID or NemID to be used in the Nordics and its easy to image R2P becoming the dominant payment method that transforms behaviour in all sorts of ways. This change to a fully R2P set up can undoubtedly bring benefits for both consumers and merchants. For example, in a B2C retail setting, a Point of Sale solution that is today a request to pay to a card accepted with a pin code can become a request to pay to a mobile device in store which is then given strong consent with a finger print ID. While you are still in the store, you will then have both the receipt of the items you have collected and approved the payment in real time.”
“In another example, an online retailer can offer an R2P payment to a customer, who then only has to approve the payment in order to buy the item. For larger corporates, customer support functions and chat-bots can be enabled to offer seamless requests to pay, for example sending a message that says, ‘thanks I’ll send a request, please accept within 2 minutes.’ There are also the possibilities of digital assistants making voice activated payment requests such as ‘you have a payment due tomorrow, would you like to pay it now?’, with you can then answer with a ‘yes’. The development of the Internet of Things (IoT) also has the potential for appliances and devices to become digital assistants making requests to pay such as ‘you are low on milk and bread, would you like to replenish now?’ The consumer approves by either saying yes or confirming in another way via an app.”
Danny Pedersen adds: “As technology changes so does payment behaviour, becoming more seamless, convenient and invisible. R2P enables the standard steps in a payment or ordering process to be rearranged and optimised. This way of making payments has the potential to penetrate both the B2B and B2C customer spheres as well where traditional invoices are currently in use.”
Enablers in place
For many consumers, R2P is already a reality when using mobile payment services. For the concept to become more widespread, the standard ways of making payments which are commonplace today will need to be reimagined.
Danny Pedersen continues: “From Nordea’s perspective, most of the R2P offerings on the B2C side are very much enabled through partner set ups like mobile payment solutions. We already have MobilePay invoice in Denmark, Vipps faktura in Norway, and Swish faktura scheduled to arrive at the beginning of this year. All of these schemes are in essence a real time instant transfer request to pay. We have enabled all of the payments that are currently possible in an account to account setting. For instance, a handyman who has just renovated your kitchen can instantly send you a MobilePay invoice while he is still at your home and you are able to accept it on the spot.”
“When invoices become real time and instant, they can basically be used as a link via any channel. Suddenly all of your communication channels become a potential sales channel. For example, a Facebook Messenger chat box from a Facebook company site or related image, can become a clickable link that is a request to pay. If the user clicks the link and their phone number is known, they receive the direct payment request with the receipt attached into their mobile payment app. They then swipe and accept or approve with their fingerprint to make the purchase. When this becomes real time, it has the potential to build a sales channel on top of every communication channel.”
“On the merchant side, whether they are a B2B company or a B2C company, a lot of the enablers required to make it easy to work with are still lacking and we will need to see an R2P ecosystem being built up in multiple areas. For example, something as simple as the insurance that you usually get when buying an airplane ticket with your credit card will suddenly need to be replaced. When airline tickets become an instant request to pay, what will happen to that insurance system to make sure there is still a strong offer from the merchant side? As insurance will no longer be bundled to the purchase or the ticket, who will provide it?” adds Danny Pedersen.
Tino Kam says: “We currently have country solutions in different shapes and forms and country partner solutions which are non-Nordea specific. We have those different elements in place, so you can say we have a strong enabler element on the market side. Where we still have a lack of enablers is on the merchant side. Is it ERP systems that are going to build that up, is it Fintechs or banks?”
Part of a Nordic wide payment infrastructure
Nordea is currently involved in the P27 project which aims to introduce a single Nordic wide payments infrastructure to the region. This has the potential to greatly increase the scope of R2P.
Claus Richter, Head of TxB Solutions at Nordea, notes: “Nationally enabled instant payments solutions will be transferred to the P27 infrastructure when that comes on line. The same thing is also happening in the EBA (European Banking Authority) from a SEPA (Single Euro Payments Area) perspective. They have instant payments, but they are also going to implement a kind of R2P scheme. Obviously for us it will become very efficient to offer R2P schemes on a Nordic wide infrastructure. If the request to pay scheme becomes part of P27 as its going to be a part of the EBA, then the scheme means we are able to offer clearing for those payment requests. We can then use the different channels like APIs or mobiles, meaning that banks could be one of the providers of this infrastructure. From a Nordea perspective, we want to become the facilitator and aggregator for these services to our customers.”
Reaching the full potential
Danny Pedersen concludes: “In order to make payments in real time on an account to account basis you would need to build up some new services to enable an end to end model from a merchant perspective. If you need to structure your business and your ecosystem after an R2P model, you would need the enablers to come from somewhere. For example, who will become the middle man, offering the insurance product, etc, the loyalty that has previously been in the card schemes needs to come from someone else. Who delivers it? Where do they get it from?”
“Those are also revenue enablers. Effectively the lower transaction costs create room for banks to be progressive in filling in the gaps in the new model, thereby capturing a part of that profit pool and also becoming service providers. Right now, what we do see with R2P is that transaction costs will be lower and the customer experience will be higher. R2P has a huge potential and we are on a journey to move it from a country to a Nordic solution, and into a full range of segments.”
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