Trade publications have had plenty of coverage on real-time payments, but are just now starting to make headlines as transaction volume is expected to grow exponentially. Payment systems company ACI Worldwide called request to pay (R2P) “the global trend in payments for 2021” in a report published in March 2021. Mastercard launched a request to pay (R2P) framework in the UK in April on the heels of European payment infrastructure provider EBA Clearing’s November 2020 R2P launch.
Here’s what finance executives need to know about R2P and its potential benefits for treasury management.
What is Request to Pay?
Depending on where you live, you might call it request to pay, request for pay (RfP), or simply “collect.” These real-time collection platforms trigger payments from bank accounts for collections.
Unlike an instant direct debit, companies that request payments can pull funds directly from the customer’s bank account with due authorization. This functionality has evolved with the wider industry’s move toward open banking and is enabled by the payment upgrade (and potential collections) connection to real-time functionality.
R2Ps are being used not just for C2B collections but also for B2B customers—potentially replacing collections via card, direct debit, and electronic bill payment and presentation (EBPP).
The interaction between the payee, the customer’s bank, and the payer for an R2P typically happens via a trusted third party using an application programming interface (API). The customer’s bank sends an R2P notice to the payer, likely via their secure banking app. Then the customer verifies the details, selects the account they wish to pay from, and ensures there are sufficient funds on hand. They can then make the payment on the spot or, if preferred, in a few days.
Along with ad hoc payments, R2Ps can also be used for regular payments as the payer can receive notifications prior to the billing date. Essentially, R2Ps give payers greater control over when and how much they will be debited since they can change the payment date, which is important in a digitally enabled society where flexibility and transparency are key.
What R2P Means for Treasury Operations
Treasurers stand to benefit from R2P in a number of ways, like cheaper collections, increased straight-through reconciliation, and greater visibility and control, which make R2P a valuable revenue stream. There is also less room for error and fraud since end customers authenticate transactions, the collections process has more automation, and many data fields are pre-populated.
There are potential sticking points with the R2P model, though, as purchases may be delayed if customers authenticate the payment, for example. The R2P workflow may also disrupt the customer experience, and that’s not desirable in an age of seamless transactions and hidden collections, like when you step out of an Uber and payment is taken painlessly via your smartphone. Even so, customers can settle bills instantly in other ways, too—thanks to real-time payments.
Despite sticking points, R2Ps are a development worth paying attention to. They signal a broader move toward real-time processing and real-time treasury, and those trends are only accelerating.