Banks have never faced competition like it. Nimble and well-funded fintechs, neobanks that can seemingly appear overnight, or the macro-economic climate of historically low interest rates continue to provide the perfect storm of threats. Digitisation is no longer a question of ‘if’, or even ‘when’, but ‘how soon’? It’s never been more important for a bank to find and wield the next big innovation. And many predict Request-to-Pay (R2P) fits that brief.
That is because R2P helps to fix a problem affecting every business; namely, getting paid on time. A late payment impacts cash flow, incurs administrative burden, and cost in chasing down. Whereas large businesses with deep pockets may be able to shoulder the shortfall in cash flow for a while, they are hit harder by their scale. In other words, the more bills you send, the more bills are late, and more resources and budget will be sucked up.
Until now, the only way for banks to support their business customers with this issue was to enable direct debit payments. But that is far from a perfect system. For starters, creating a direct debit mandate is not without hassle for the bank, and hence why it is not offered to every business customer (or offered at a significant cost). For the payer, although the ‘set and forget’ nature of a direct debit can seem attractive at first, the benefit of ease can erode when a payment schedule suddenly increases, as we are currently seeing with utility bills and the general hike in the cost of living.
R2P gives banks the opportunity to solve late payments for businesses of all shapes and sizes – from the multinational utility provider to the sole trader. But rather than simply helping billers get what they are due, R2P also opens additional revenue streams. R2P can be equally used by businesses to market and process one-off purchases, upsells or special offers. Plus, the ease and convenience of making an R2P payment makes it more likely that a customer will respond positively.
What’s more, for a world now comfortable with digital banking, R2P is a seamless extension to our familiar payment tools. A ‘payer’ simply receives a payment request via their banking app and can then approve, reject, or query it. The first option will initiate the payment (typically instantly), while querying the request gives the payer the information they need before making that decision. This is a crucial upgrade because it removes the ambiguity that can cause a valid payment request to be left unpaid. Instead, the payer is more likely to seek and receive the verification they need because they have the tool to do so literally in their hands when the request is received. Compare this to a paper invoice that is put aside until you have the time to get to it.
Banks are not the only ones eyeing up the R2P opportunity. With the emergence of Open Banking, it is becoming easier for non-banks to process payments. This cohort has already demonstrated the significant market share they can commandeer in a short time. Banks should have no doubt they are now in a race for R2P wins. But they have a wonderfully simple and compelling pitch to businesses: ‘Who do you think your customers will trust a payment request message from: their bank, via the same app they use for all their daily banking activity, or an unfamiliar fintech?’
Clever banks will understand that R2P is not just the opportunity to help their business clients get paid on time. By inserting themselves into the conversation between biller and payer, a bank gets access to valuable data about both parties. It does not take much to turn those insights into recommendations of appropriate banking products, be it retail finance solutions such as BNPL, personal loans or credit lines, investments, digital wallets, wealth management services or many more.
If R2P is banking’s new opportunity, the next question is how to enable it? Traditionally, banks have built their own solutions in-house. But the convenient and seamless digital experiences that businesses and people expect today are hard to achieve with bespoke, proprietary systems. That’s why banks are turning to the ‘plug and play’ approach that fintechs have built their success on; best-in-class capabilities, easily integrated together, able to run in any environment, and maintained by a third-party. This is how they should enable R2P too.
For starters, it makes R2P immediately available. There are R2P solutions available today that a bank can simply connect to and start offering. But speed should not be the only requirement. If R2P takes just a slice of global bill payments, multiple billions of transactions will be settled with it. So, you need a solution that can handle that scale in terms of availability, security, and configuration for different markets. Better still if you can access R2P alongside other banking services, delivered across a composable platform. And one that has the market reputation and track record that attracts others to collaborate and so spurs further innovation and improvements.
This is what Temenos has built with our new Request-to-Pay solution. And our recent partnership with Mastercard adds a new dimension that the solution can leverage alongside Faster Payments, Bacs, and SEPA. It makes it even easier for banks and their business clients to accelerate adoption by linking Temenos and Mastercard services to access a complete end-to-end payment and communication mechanism between billers and payers.
We will soon be making R2P available on the Temenos Banking Cloud, alongside a full suite of banking capabilities that includes BNPL, digital mortgages, deposit accounts, fraud mitigation tools, and many more.
R2P is the answer to the problem that businesses and their customers have faced for too long. Banks can be their saviours and reap new commercial and reputational benefits. Those that stand the best chance of success will strike first, but also partner wisely.
About Mick Fennell
With over 30 years’ in banking software, and 20+ years’ experience in the global payments eco-system, Mick is a highly-skilled business and market development specialist. In his current role at Temenos he is responsible for driving the global business growth strategy of Temenos’ award-winning payments offerings and supporting clients with their ambitions to scale and prepare for the future.
About Temenos
Temenos is the world’s leader in banking software. Over 3,000 banks across the globe, including 41 of the top 50 banks, rely on Temenos to process both the daily transactions and client interactions of more than 1.2 billion banking customers. Temenos offers cloud-native, cloud-agnostic, and AI-driven front office, core banking, payments and fund administration software enabling banks to deliver frictionless, omnichannel customer experiences and gain operational excellence.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now