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Around the world in Request to Pays

A perspective from Mike Chambers, from Answer Pay on how Request to Pay is rolling out around the world.

The world is waking up to Request to Pay as the answer to convenient and affordable digital bill payment management. Request to Pay has arrived and is expanding globally.  In this blog we look at some of the more interesting international developments.

The Request to Pay stories we won’t be covering

And—before we get started—just to say that we won’t be covering India’s unified payment interface (UPI).  It stands out as one of the more successful Request to Pay solutions although one could argue that it’s old news, so we haven’t revisited it here.

We’re also excluding Pay by link services that are sometimes grouped together with Request to Pay services.  Pay by link is typified by a payment link being sent by the biller/biller’s Payment Service Provider (PSP) to the customer’s email or SMS.  Clicking on this link will take you to a checkout page with payment methods that the biller has chosen for the payer.  Services like these have been around for a long time and are enjoying a bit of a renaissance with the advent of Open Banking. 

A re-cap on Request to Pay and its role

Request to Pay though offers something quite different.  It can be typified by the provision of a two-way communication channel where the request for payment is delivered to an interface that the customer has chosen as their trusted mailbox.  This could be a bank app or digital wallet for example which usually require multi-factor authentication to access and are not subject to the same spam and phishing as e-mail and SMS.  This additional security, payer empowerment, and biller commercial opportunity is the reason why Request to Pay is going global.

 

Request to Pay around the world

Request to Pay in the United Kingdom

Following a thorough design process including stakeholders from biller and payer communities the Pay.UK standard was launched in May 2020.  This broad stakeholder community created a real balance in providing both biller and payer benefits for a vastly improved customer experience to today’s bill payment options. 

Answer Pay were the first adopters of the UK standard in June 2020, and we’ll be using the UK implementation as our reference point as we look at how services have developed in other regions.

The service is dependent on Financial Conduct Authority regulated providers who manage the interfaces with both the biller and the payer.  This restriction is in place to ensure that Know Your Customer (‘KYC’) practices are in place. 

An overview of the process is below[1]:

[1] Request to Pay infographic

Request to pay schematic demonstrates how it works between the biller and the payer

Key characteristics of the UK implementation include :

  1. A messaging channel
  2. Communication is secure application to secure application
  3. Decentralised repositories managing participant identities and message routing
  4. Payers are required to create new ID
  5. Payment method agnostic - payers can pay with any method they like. Payer apps then send a bank transfer to the biller, so they only have one process to manage
  6. Mandated payer displayed options - great for bill payment but it does mean that it may not be suitable for eCommerce scenarios.

Request to Pay in Europe

The European Payments Council released their new standard on 15 June.  This comes at the perfect time as there is a lot of pressure to increase SEPA instant volume as adoption to date has been slow by the banks and in turn customers.  The Council of the European Union feels very strongly that Request to Pay forms an essential part of this plan, so much so it may be mandated…

“...legislative action may be needed to promote adherence to the SEPA Instant

Credit Transfer (SCT Inst.) scheme and to its additional functionalities (e.g. requests to pay, QR codes and proxy lookup services).”[1]

Mandating Request to Pay will no doubt accelerate adoption in both Europe and adjacent markets such as the UK given the number of organisations that are multi regional. 

Whilst conceptually like the UK implementation, there are differences when it comes to implementation. 

  1. Tied to SEPA payment rails (either directly or Open Banking)
  2. Only available in Euro although plans to expand for none Euro markets
  3. No additional payment options for the payer, simply pay or don’t pay
  4. Not limited to financial service providers - eInvoicing companies for example can become scheme members
  5. No new ID for payers - Payers need to specify their payment app and their unique ID for that app to permit message routing.

These differences to the UK standard potentially mean a broader application in the market.  Indeed, a recent survey by the European Payments Council suggested that the predominant use case will be merchant payments.[2]

Request to Pay in United States of America

“Six out of 10 customers indicate that they get anxious when they think about their bills for their household, even when they have a few extra bills that month,” according to Aite[3].  The same report also identified real-time payments as having the biggest impact in helping customers pay on time.  It’s perhaps not surprising then that the US, much like SEPA countries, has taken a bank centric approach centred on increasing instant payment volumes.

The Clearing House is a pre-existing single integration point for US banks that connects them to an instant payments service.  On top of this The Clearing House have developed their services called “RTP® Bill Pay”.  Relying on the pre-existing interfaces of banks already in the market, payers would enrol using their banking app to be available in the Request to Pay ecosystem.  Billers via their bank would then be able to send a request for payment that would be routed via The Clearing House to the customers mobile banking app. 

What’s exciting about this implementation is the intention to adopt by 23 US banks representing 40% of the US consumer market[4].  Major differences to the UK implementation include:

  1. Lack of payment method options - only account to account payments
  2. Reduced payment options e.g., ability to set a future date of payment exists but not the ability to request a payment deadline extension
  3. The use of ISO20022 standardised messages (also used by SEPA Request to Pay). While ISO20022 is also available in the UK, there are no payments in that format yet
  4. The customer identifier that they share with their biller for message delivery is their routing number and account number (pre-existing bank credentials)
  5. Centralised routing via a single party (The Clearing House).

Request to Pay in Australia

Australia has an incredibly dynamic payments market and is often a frontier market for global companies to launch innovative services.  This is perhaps exemplified by the fact that today nearly a quarter (24.1%) of all online purchases involve the use of a digital wallet with it set to become a dominant form of payment by 2024[5].

It perhaps comes as no surprise then that Australia is a lead market for Request to Pay services with BPAY offering a banking centric option for billers and payers in a format that we’d see as comparable to the UK version since 2002 with the launch of BPAY view.  The runaway success now sees 60% of Australians paying their bill using BPAY.[6]

Customers log into their mobile or online banking app and then select which billers they wish to receive their bills from and their account number with that biller organisation. 

The biller then using their service provider initiates a request for payment. 

The biller service provider sends the relevant requests to the BPAY hub which routes the request to the appropriate payer financial service provider. 

Some of the big differences from the UK example then are:

  1. No new payer ID
  2. A directory of billers is selectable within the payer’s application
  3. A centralised service
  4. Payer side is tied to banking providers although biller side is open
  5. Payment options are limited to account-to-account transfer or card payment if the payer app is the issuing bank.

Conclusion

Request to Pay has become a global movement with significant ground being made in those markets that have deployed early.  Whilst conceptually these territory-specific deployments all have in common secure messaging to apps rather than email or SMS, they also have fundamental differences.

Pay.UK’s framework has been designed so that banks, PSPs and other large multinationals looking for a simple roll-out can work with a technology partner that can supply a single point of integration across these standards and handle the complexity of translating the messages. 

[1]  https://data.consilium.europa.eu/doc/document/ST-7225-2021-INIT/en/pdf 

[2] https://www.europeanpaymentscouncil.eu/news-insights/news/results-epc-poll-use-cases-sepa-request-pay-srtp-scheme 

[3] https://www.aciworldwide.com/wp-content/uploads/2021/04/us-consumer-payment-experience-a-blueprint-for-creating-positive-behaviors.pdf 

[4] https://www.theclearinghouse.org/payment-systems/articles/2021/05/050521_050521_innovative_banks_back_intelligent_bill_pay_capability_rtp_network

[5] Worldpay Global Payments Report

[6] https://australianfintech.com.au/60-australians-pay-bills-using-bpay/

[1] https://australianfintech.com.au/60-australians-pay-bills-using-bpay/