Request to Pay – A peek into the future of payments

Request to Pay (RTP) is a secure messaging and payment platform that sits over the existing payments platform to provide a flexible way to pay and manage bills between organizations, businesses, and individuals. This blog aims to explore how RTP works and understand the advantages and challenges in its adoption. We will also examine if such a system can ease the pain of businesses and individuals caused by COVID-19.

How has Coronavirus impacted the financial market?

The Coronavirus pandemic has brought (or, at least, hastened) the next financial crisis that the world has been anticipating since 2008. The pandemic went on to thrust unprecedented worldwide lockdowns, an uncertain business environment, and an unknown timeline on when all this will end.

As a result, many businesses have shut down permanently and workers have been furloughed. Despite that, the true extent of damage is yet to be ascertained. It would not be incorrect to say that this financial crisis will draw comparisons with the 2008 financial meltdown and the Great Depression of 1929.

Governments worldwide are applying the lessons learnt from the 2008 financial crisis by providing fiscal stimulus, increasing public spending, and providing moratoriums on loans. However, coming out of the woods of this pandemic requires out-of-the-box solutions.

Request to pay (RTP) is one such solution. While it does not eliminate the pain on businesses of all types, it surely alleviates it. A real-time payment system, RTP provides flexibility to people to manage their bills and obligations through communication with their billers or lenders.

How does Request to Pay work?

The following illustration outlines how Request to Pay works and how it has become such a cost-effective real-time payments channel, formalizing communication between counterparties.

Salient points:

• Billers or lenders can send regular or one-off payment requests to customers.
• At a minimum, the request would include the due amount, due date, reference number, and attachments (if any).
• The customers/payee can pay in full or make a part payment, decline the request, request an extension for payment, or send a message.

Typically, the method used in RTP is not quite different from the traditional methods used by lenders and billers. Traditionally, debt collection is done by calling the customers. If the customers seem to be falling behind their bills or obligations, an adequate extension or a customized solution is provided for the eligible customers. RTP formalizes all these communications and requests systematically.

What are the advantages of Request to Pay?

Collections can be a tedious and costly process for billers and lenders. Moreover, in this pandemic-driven scenario, even the typically on-time customers will find it difficult to pay debt on a timely basis due to the uncertain business environment. Chasing customers through phone calls or notices, coupled with the operational costs and increased volume of defaults, can be challenging for lenders and billers.

Enter RTP! The first advantage is that Request to Pay can help by reducing the costs and managing the volume. Further, it can offer benefits like sending payday reminders, providing an extension to customers systematically, and building an easy reconciliation process.

The following are the quantified benefits of Request to Pay:

1) Cost-effective payments channel
2) Easy mode of communication between biller/lender and customer
3) Ability to send reminders
4) Benefits to customers who cannot pay temporarily
5) End-to-end audit trail
6) Smoother reconciliation process

Are there any challenges in adopting RTP?

Request to Pay can create a whole new experience in payments, with benefits to both the biller/lender and the end customers. However, there can be challenges too:

• To accommodate the RTP system, organizations will have to make changes in their CRM, billing, and compliance systems, and operational procedures.
• Regulators and credit rating agencies will have to make space to accommodate payment extension requests without adversely affecting the end customer’s credit ratings.

The COVID-19 pandemic has provided an opportunity to lenders, organizations, and fintech to test the waters for RTP. A limited pilot launch by organizations could go a long way in evaluating the usability of such systems. Use cases like bill discounting, payment requests from friends, etc. can be evaluated for RTP, which can form the base of its acceptability in payments and other critical domains of the organization.

Our conclusion

Request to Pay can be one of the most important tools in fighting the financial slowdown brought about by the Coronavirus pandemic. Advantages like flexible payments provide immense benefits to all such customers who cannot pay due to the uncertain business environment despite their willingness to make the payment. RTP also provides intangible benefits to billers/lenders as customers will see them as (having been) caring during hardships like this pandemic. Lenders, billers, and organizations will enjoy immense benefits, thanks to lesser costs and reduced work volume in chasing customers.

Request to Pay can be a game-changer in the payments value chain. Want to take a step towards more modern payments that offer better efficiency and transparency? Explore our offerings and get in touch with our experts to know more!