By Dean Wallace, Practice Leader Real-Time Payments Innovation, ACI Worldwide
How often have you been in a situation where you realise slap bang in the middle of the month that you’re late paying an important bill? And when you check your bank account to see if you can pay you are hit with a wave of dread? Readers of this article may not be in that situation regularly in their lives today, but most of us have been there at some point, and probably know others that are regularly confronted by this and can sympathise.
Well, that panic that consumers experience when confronted by the likelihood of missing a bill payment should soon be over, as multiple markets across the world will be introduced to a new payments innovation called Request for Pay (RfP). RfP goes by different names depending on the market, e.g. Collect payments in India, Request 2 Pay in Europe, Request To Pay (RTP) in the UK, or Request for Payment (RfP) in the US. Regardless of name, RfP offers the same benefits; secure messaging between the consumer and the biller / merchant to improve the control, flexibility, transparency of paying bills and, because RfP is primarily being implemented on top of real-time instant payments, immediacy of funds movement, whether settling bills with businesses or with friends and family, will happen straight away.
To use RfP as a consumer, a typical scenario would involve the consumer receiving a ‘request’ to pay from the business, usually via a trusted app (most often the bank’s app) on the consumer’s mobile device. Consumers then have a range of options putting them in control of how they manage the payment, such as paying the amount in full, paying in part, scheduling a reminder, asking for more time or declining the payment, the last two options of which would then trigger a conversation with the requester. The consumer is therefore given more control of how and when they want to manage their money.
The benefits are clear. However, like with any new product, in order for widespread consumer adoption, the benefits of the service need to be well communicated and understood to ensure consumers have a compelling reason to use it. And that compelling reason has some hefty competition to stand up to. Take e-Commerce, for example, where PayPal’s payment experience has long been held up as a paragon of successful customer experience, making sure consumers have a very simple log-in process to make a payment. There are currently 254 million active PayPal accounts worldwide, it has widespread acceptance by merchants, and is the preferred eBay payment type by almost 180 million eBay users worldwide. With the bar for payments being set so high by PayPal, and to be fair some new age mobile wallets also, for RfP to work, it needs to at least match, if not exceed, the expected standard of customer experience. Fortunately, there is a way it does this, through the benefits of convenience and transparency.
With convenience in mind, when consumers want to see their balance before making a payment, then their mind would quickly move to using their bank’s app. And that’s where RfP comes in: users can see their balance, or use their registered address if they need a delivery, or want to make sure they have the actual merchant’s name on the statement, rather than some back-office trading name they wouldn’t recognise on their statement, etc. Do this a few times and many users will quickly form that new payment habit. Recognising that the appetite for the service from consumers could be there, banks have already started to seriously look at the business case for RfP to improve customer service, client relationships, and reduce overall consumer debt management costs. In order to further encourage adoption, banks need to educate on the benefits and also, could incentivise.
With consumers now being more budget-conscious, incentivising RfP usage could leverage something we see in the credit card space; loyalty points. Offering loyalty points when the service is used could encourage consumer decisions to use RfP to collect such points helping consumers collect points towards flights, hotels or days out. Loyalty points are a great way to get a customer to keep coming back and using your service. Alternatively, banks could offer cashback based on usage patterns, which is a common and effective practice in markets such as the United States.
Another way to incentivise the consumer is through merchants-enabled instalment plans, with real-time credit risk scoring so a line of credit can be offered and taken there and then. Such an offer of spreading costs over time helps further the consumer’s control over their payments and financial position. We’ve all been in that situation where we see something, we really want but can’t quite afford or justify spending such a large sum at that time. With credit-enabled RfP, consumers can dictate to the merchant how much they’re willing to pay per month and for how long, allowing them to not only keep on track of their personal budgeting, but own the purchased goods immediately. And merchants get the sale, plus potentially a share of any charge for credit. This capability is typically seen as a Day 2 feature in markets exploring RfP, but we can clearly see the applicability and desirability to merchants and consumers alike.
Cheque users will also rejoice when they start using RfP. More often than not consumers who choose to pay by cheque do so because they know there will be a delay in the transaction; with RfP this delay can be accurately specified by the consumer. They will have the power to decide when the money will be taken out of their account.
RfP has the potential to revolutionise payments, helping millions of consumers and billers to manage their money better, as well as allowing fintechs and merchants to introduce new ways to purchase goods and services. It’s going to be interesting to see the different use cases emerge as RfP continues to come to market across the world. We’re already seeing WeChat Pay being used in China; this is a payment feature integrated into the WeChat app (social messaging platform), allowing users to complete payments socially on their mobile device. This is just the beginning of how payments will evolve.
While there are hurdles to overcome and mass adoption won’t happen overnight, by offering a flexible and transparent payment experience merged with the ability to better manage finances, I believe that we will be seeing more RfP digital payment experiences very soon in Europe, the US and other markets that are already making the move to Real-Time.