Request to Pay Basics
Request to Pay arrangements are messaging services built on real-time payments infrastructure that enable businesses to request and trigger payments from payees’ bank accounts.3 They have some similarities to existing bank-supported payment collection methods such as direct debit, and to capabilities provided by proprietary e-invoicing and payment platforms. But they provide advantages over those systems due to a unique combination of features, experts say:4,5
- They are typically built on national payment systems, so they can be used by businesses with accounts at any bank with access to those systems.
- They request and execute payment within seconds.
- They can be used for ad-hoc payments, unlike direct debits, because there is no need to set up payments in advance.
- Some methods allow payees to make partial payments or initiate a conversation about a payment with the seller.
Request to Pay approaches are generally based on one of two models. They may be built into a national clearing system to which banks connect, or they may be based on open banking, accessible to banks via application programming interfaces (APIs).6
How could Request to Pay be useful in B2B Payments
How could Request to Pay be useful in B2B transactions? U.S. payments infrastructure provider The Clearing House describes an example of how Request to Pay could facilitate a transaction between a restaurant and a food supplier that doesn’t extend trade credit. The restaurant needs produce for its dinner service that night, and the supplier needs to be paid before shipping the goods. The main steps include:
- The supplier receives an order from the restaurant and sends a Request to Pay through its bank.
- The payment infrastructure validates the request and routes it to the restaurant’s bank, which notifies the restaurant.
- The restaurant receives the request electronically, with a “Pay Now” button. The request includes relevant invoice and remittance information so the restaurant can easily identify the corresponding order.
- Payment completes within seconds; the supplier and restaurant are notified, and the supplier ships the produce in time for dinner.7
Potential Benefits of Request to Pay
Proponents say that Request to Pay potentially offers several benefits:
- Faster payments with real-time settlement, enabling faster B2B transactions.
- This could help SMEs that are suffering cash-flow problems due to late payments, according to some experts.8
- The structured remittance information included in the payment messages facilitates straight-through processing.9
- Fewer chargebacks or failed payments, because payments execute immediately and irrevocably.10
- Flexibility for payers. In the U.K., the payer will have options to pay in full, pay in part, ask for more time or decline to pay and begin a dialogue with the requester, according to the U.K Faster Payments system provider. This could be particularly important for the growing number of contractors and small businesses that have irregular income.11
- Businesses need only a bank account to participate, so Request to Pay may be useful in regions where credit cards are not widely used.12
National Rollouts
Countries that are rolling out Request to Pay systems include the U.S. and the U.K. In the U.S., Request to Pay is a feature of The Clearing House RTP system, which was launched in late 2017. The availability to businesses depends on adoption by banks; one bank announced support for the service in late 2018.13 The U.K. plans to add Request to Pay to its national Faster Payments service in 2019, positioning the service as a new flexible way to settle bills between businesses as well as among friends.14 Some experts expect other Request to Pay systems to launch in Europe and other countries, facilitated by the spread of open banking and real-time payment systems.15
Obstacles to Adoption of Request to Pay
Despite the potential benefits, Request to Pay arrangements may have to overcome several obstacles in order to achieve wide adoption, experts say. Some businesses are concerned that cumbersome authentication requirements may be required for every transaction. Businesses will also need to integrate Request to Pay into their invoicing and approval workflows. Banks need to build support for Request to Pay into their systems. Most approaches are also only designed for domestic currencies, which has implications for multinational corporations that operate in several different currencies and have to support different systems. And countries with large unbanked populations are likely to derive less value from Request to Pay.16
