European regulation and technological innovation, as well as the pandemic, have shaken payment habits and have therefore disrupted the payment industry. In fact, consumers are more than ever looking for easy-to-use, instant, and secure means of paying online: the demand for flexible and transparent solutions has never been higher. Request-to-Pay (RTP or R2P), combined with instant Open Banking-powered payments is to play a central part in the future of payments, giving notably more control and freedom to both payees and payers.
First and foremost, RTP is not to be confused with a payment means or a payment instrument. It is rather a way to communicate a request to be paid. RTP can therefore be described as a messaging functionality, where the payee takes the initiative to request a specific payment from the payer, while providing the latter with all required information (amount, recipient, etc.).
This functionality has been used for several years but is to fulfil its immense potential by leveraging Open Banking-powered payments as a new settlement method. Over the past months, it evolved from being used within closed payment method networks to theoretically every bank and payment account in Europe.
RTP offers many benefits to all stakeholders, from merchants (‘invoicers’ or payees) to consumers (or payers), mainly revolving around the ease of implementation first, and then, of use.
On the one hand, merchants and their IT teams benefit from a simple technical integration by leveraging REST APIs, enabling them to offer this new payment solution in no time.
RTP also means lower fees than credit cards or e-wallets, as well as fewer payment rejections/failures (and therefore fewer reconciliation efforts). In fact, as no manual input of payment or recipient details is needed, the number of possible mistakes decreases drastically.
Moreover, it can support several additional use cases where the acts of purchase and payment are dissociated, either to give more flexibility to the consumer (Buy Now, Pay Later) or because the business model requires it (pay-per-use, for utilities and energy, notably). RTP also brings additional security in certain use cases such as telesales (for instance, when buying airplane tickets, the consumer receives a link by SMS to make the payment while on the phone, instead of providing his/her credit card details).
Also, no sensitive payment data is shared with any third party, as Request-to-Pay relies on SCA (Strong Customer Authentication), on the bank’s website or mobile app. It also means that, on the other hand, consumers can enjoy a smooth and flexible experience, as they do not need to sign-up or register for a third-party service to proceed. In a digital era that sees many innovative solutions emerge, providing consumers with flawless experiences through unique and enjoyable services becomes a key differentiator.
Combined with Open Banking-powered A2A (account-to-account) payments, RTP offers even more advantages: merchants receive their funds through immediate payouts which means virtually no fraud risk and better cash flow management. Moreover, it gives them better visibility of stocks and enables more efficient cash management.
Similar benefits apply to payers, as RTP and instant payments provide them with better financial visibility as the payments are withdrawn directly from their accounts. Moreover, if allowed by the merchant, consumers can choose to pay the entire sum, or split it into several parts, over a certain period (defined by the payee).
In more concrete terms, RTP and Open Banking payments can be easily implemented and used by corporations, organisations, and public administrations for the benefit of clients/citizens. RTP x Open Banking, therefore, offers an innovative framework in the form of secure messaging service, with secure and guaranteed payments.
LUXHUB’s latest payment solution, built on top of its ONE PAY product, enables a business or public administration to collect a bank account payment with no online store/checkout page needed. Open RTP is based on PSD2 APIs and is scheme-agnostic to support as many banks and markets as possible without the need for one-to-one closed partnerships or limiting technical frameworks.
It supports specific use cases where, for instance, certain payment information is not known at the time of request creation (payer’s bank, amount, etc.).
Open RTP gives full control to the payee, as well as an overall view, over the request lifecycle (tracking whether the request was viewed or not by the payer, possibility to set an expiration date, possibility to reuse a request multiple times, option to directly reject the request and/or comment it, etc.).
Finally, the solution also gives the possibility to the merchant/payee to include several branded elements in the payment user interface to reassure the payer, provide him/her with a unified experience, and therefore increase payment conversion.
This article has first been published in the Open Banking and Open Finance Report 2022. Click here to download the report.
Ramzi Dziri is the Open Banking Product Manager at LUXHUB and has more than 10 years of experience in different startups in Berlin and Munich, with a specific focus on digital platforms and electronic payments.
Open Banking Pioneer LUXHUB takes an active part in the transformation of the financial services industry, responding to customers’ needs while providing banks with new revenue streams. Through its AISP and PISP licenses, it aims at helping all companies to take full advantage of Open Banking opportunities.
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