Request to Pay: The Next Chapter in Collections Innovation
By Tony McLaughlin, Emerging Payments and Business Development, Treasury and Trade Solutions, Citi
While the media may be full of talk of cryptocurrencies and blockchain, a quiet revolution in payments is gathering momentum: the emergence of real-time Request to Pay (RTP) collections. Regulators are creating open digital markets, merchants are reducing the friction and cost of collections, financial technology companies are building new services on top of banking rails and financial institutions are exploring new ways to deepen and enhance the customer relationship. Although the value proposition of RTP schemes may be significant for many corporations, particularly those engaged in eCommerce, they will be successful only if they meet the detailed needs of payment system users. Consequently, it is essential that treasurers engage with the wider industry to influence their development, with the potential to transform both C2B and B2B collections.
RTP in practice
RTP is a collective term for schemes that trigger payments from bank accounts. In contrast with direct debits, RTPs are real-time and suitable for single or ad hoc payments. They do not require a static upfront mandate from the payer and are not subject to extended rights of revocation. RTP is effectively an upgrade of electronic bill presentment & payment (EBPP), enabling the payer to approve and execute a requested payment in real time.
RTP schemes work in a broadly similar way (see figure 1); however, schemes in each country are generally designed according to one of two models: a national clearing system to which banks are connected, such as UPI in India, and open banking, in which participating banks are accessible through application programming interfaces (APIs), such as PSD2 in Europe.
Fig 1 - RTP in practice
Each model has pros and cons. For example, a central clearing system is more harmonised, but future developments may be more difficult to deliver. The open banking model is more flexible and extensible, but there is a risk of fragmentation. These models are not mutually exclusive, and it is likely that both will co-exist in some markets.