Navigating the Payment Landscape: Request-to-Pay in SEPA Payment Ecosystem
The Next Big Leap in Payment System
The financial landscape is continually evolving, driven by advancements in technology and changing consumer preferences. In this dynamic environment, banks are required to adapt and embrace innovative payment trends to cater to the needs of end consumers and businesses. One such trend is the Request to Pay service (RTP), which demands system upgrades and solutions to enable seamless transactions. Additionally, the payment industry is witnessing a surge in various payment methods, including virtual cards, embedded finance, and biometric payments, all set to redefine the conventional nature of banking services.
RTP functions as a messaging feature rather than a payment method or instrument. Its purpose is to facilitate the initiation of payment requests, acting as a bridge between a payee and a payer for specific transactions. The payer receives the digital request on their mobile device through channels like mobile banking apps or third-party fintech platforms. Subsequently, the payer has the option to accept or reject the payment request.
What is Request to Pay?
In the payment flow, Request to Pay serves as a complementary element, supporting the end-to-end process between an underlying commercial transaction and the actual payment. It plays a crucial role in enabling digital payments.
Request to Pay represents an exciting and innovative advancement in the payments industry, introducing a more versatile and transparent approach to settling bills among individuals, organizations, and businesses. By functioning as a messaging service, RTP supplements existing payments infrastructure, empowering billers to request payments for bills, moving beyond the traditional method of merely sending invoices. When a request is made, customers have various response options, including paying the full amount, making partial payments, requesting additional time, communicating with the biller, or declining the payment request. Notably, the customer's response does not alter their legal obligations.
Why do we need Request to Pay?
The significance of Request to Pay (RTP) can be understood from various perspectives:
As Consumers:
One in five individuals in the UK feels a lack of control over their account outgoings. RTP provides a solution to enhance control and management of financial obligations.
Additionally, one in ten people faces the challenge of forgetting bill payments, leading to late payment issues. RTP offers a convenient and real-time method to address this concern, ensuring timely payments.
As Banks or Financial Institutions:
RTP presents a significant advantage for banks when it comes to sending and receiving instant payments. The system requires smaller amounts of liquidity, enabling banks to process more transactions efficiently.
In contrast to Direct Debits, RTPs operate in real-time, making them suitable for single or ad hoc payments. Importantly, RTPs do not necessitate an upfront mandate from the payer, streamlining the payment process.
RTPs can be seen as an upgrade to Electronic Bill Presentment & Payment (EBPP), enabling payers to approve and execute requested payments in real time. EBPP is a common electronic payment process utilized by companies, allowing payments through various channels such as the internet, direct-dial access, or ATMs. RTP further enhances and complements this existing payment method.
How does Request to Pay work?
Request to Pay operates as a 'pull payment' system, with the payee initiating a specific payment request from the payer. This digital request is received by the payer on their mobile device, typically through a banking or fintech application. Subsequently, the payer has the option to approve a real-time credit transfer, reject the request, make partial payments, or request additional time. Branded as the next evolution in real-time digital payments, Request to Pay empowers corporates, merchants, billers, and individuals to initiate payments from end customers and payers.
How does Request-to-Pay operate within Single Euro Payments Area (SEPA)?
Request-to-Pay follows a two-stage process. Firstly, you request money from your bank or card provider. Once the payment is authorized, you can transfer it to your biller's account.
SEPA (Single Euro Payments Area) - Enhancing Electronic Payments in Europe
SEPA (Single Euro Payments Area) is a pioneering payment system in Europe, strategically designed to elevate the efficiency and convenience of electronic transactions for businesses and consumers alike. The SEPA project was officially initiated on January 1, 2008, and has been continuously adopted and evolved ever since.
Request-to-Pay: A Streamlined Invoicing Solution
One of the remarkable features of SEPA is the integration of the Request-to-Pay mechanism, offering a simplified way to send invoices to clients in SEPA format, which includes CORE (Credit Transfer) or ADIF 2.0 (XML-based format for invoicing) options. This process enables the seamless delivery of invoices via email directly to the recipients, providing them with the ease of making payments online using their bank account number, IBAN (International Bank Account Number), and BIC/SWIFT code.
Advantages of Request-to-Pay
The adoption of Request-to-Pay offers numerous advantages that streamline payment procedures and optimize efficiency:
Consolidated Payments: With Request-to-Pay, it becomes possible to settle multiple bills with a single transaction between your bank or card provider and the European Payments Council (EPC). This consolidation simplifies the payment process, reducing the need for multiple transactions.
Enhanced Efficiency: By eliminating the necessity of entering biller details separately into the Request-to-Pay service, the overall payment process is expedited. This streamlined approach makes transactions faster and more convenient for both parties involved.
Improved Security: Request-to-Pay diminishes the risk of fraud by eliminating the requirement of providing sensitive data, such as account numbers and passwords, to the service. This ensures a higher level of security and safeguards against potentially fraudulent activities.
SEPA Direct Debit Continuity Post-Brexit
Amid the uncertainties surrounding Brexit, SEPA Direct Debit stands resilient and continues to be available in all European Union countries. Furthermore, it is accessible to countries outside the European Economic Area and the European Free Trade Association (EFTA). This unwavering availability ensures that businesses and consumers can continue to leverage the advantages of SEPA Direct Debit without disruption, fostering stable financial transactions across borders.
SEPA has revolutionized electronic payments in Europe through its forward-thinking approach, and the incorporation of Request-to-Pay has further simplified invoicing and payment processes. With SEPA Direct Debit remaining unaffected by Brexit, businesses and individuals can confidently engage in cross-border transactions, promoting economic cohesion and financial efficiency across the region.
Available Payment Options with Request-To-Pay
The Request to Pay service holds the potential to revolutionize the payment ecosystem, empowering both end consumers and businesses. However, to fully support this service, banks need to upgrade their systems to meet the local scheme requirements. This includes the implementation of solutions that allow businesses to initiate payment requests and enable customers to respond promptly.
Request to Pay - At the Forefront
In different parts of the world, leading organizations have taken the initiative to launch the Request to Pay service. Pay.UK introduced it in the UK in June 2020, followed by EBA Clearing in Europe in November 2020. The Clearing House brought the US version, 'Request for Payment,' to the market in November 2017. This service is becoming increasingly prevalent, and almost all local payment schemes are expected to offer their versions.
The Rise of Innovative Payment Trends
Embedded Finance and Instant Payments: As the financial world embraces digitization, embedded payment methods and instant payments are gaining momentum as preferred options. The Covid-19 pandemic further accelerated this shift, leading to increased reliance on newer payment methods such as BNPL, one-click payments, and real-time payments. The convenience and speed offered by embedded finance have proven beneficial for both consumers and businesses.?
Growth of Embedded Finance: Forecasts indicate a promising future for embedded finance, with a projected double-digit CAGR from 2021 through 2026, resulting in billions of euros in market size. However, some concerns have been raised by surveyed respondents globally, such as the possibility of being charged the wrong amount and limited knowledge about the concept.
Expansion of Instant Payments: The market size of real-time payments is projected to experience significant growth, reaching billions of euros by 2028. Major corporations are proactively updating their payment systems to optimize instant transfers. Surveys show that many firms globally regard their capabilities in real-time payment systems as highly important.
Challenges in Adopting Instant Payments
Despite the growing popularity of instant payments, several challenges hinder its widespread adoption. A survey of financial professionals in the U.S. identified a lack of skills and priority given to other initiatives as the primary obstacles as of June 2022.
SEPA Instant: Changing the Payment Landscape in Europe
The launch of SEPA (Single Euro Payments Area) has brought about a transformation in payment infrastructure across Europe. This has enabled the smooth functioning of credit transfers and direct debits within the EU. However, the adoption and usage of SEPA Instant vary across nations, as evidenced by survey data.
The Future of Payment Trends
?In-Car Payments: With an increasing number of connected vehicles globally, the demand for in-car payments is on the rise. Projections suggest a double-digit CAGR between 2023 and 2027, with stakeholders and OEMs collaborating to expand the scope of in-car payments through strategic partnerships.
Virtual Cards: Virtual cards have captured consumer appeal and are expected to witness substantial growth. Forecasts show a double-digit CAGR between 2022 and 2026, leading to a market value in the trillions of euros by 2026. Nevertheless, the adoption rate among online shoppers is still evolving.
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Payment Security
Request to Pay, a superior alternative to pay by link, offers a long-term solution for mobile money movements without being a mere internal data routine matter with minimal commercial impact. According to the latest figures from September 2021, total fraud losses rose by 30% in the first half of that year compared to the same period in 2020.
Those handling bill management, are the most likely to express security worries. The Fiserv survey reveals that 64 percent of individuals between 18 to 26 years old are concerned about the safety of paying bills, and 49 percent worry about receiving them.
Request to Pay presents a digital bill payment approach that seamlessly integrates the communication aspect of bill payments, such as sending and receiving invoices, with the actual payment process. It operates as a messaging ecosystem that facilitates secure communications, enabling safe payment requests.
In contrast to traditional payment methods, where customers must visit a biller or merchant to initiate payments, Request to Pay decouples this process. Now, billers can initiate payment requests, and customers have the freedom to choose where and how they want to make their payments.
According to the estimates of a credible surveyor’s reports, the Request to Pay market potentials to account for 1,354 million transactions annually in the UK, where 55% of utility bills are paid through Direct Debit and the rest through cards, cash, and cheques.
Point of Frauds
Fraudulent activities can take place across all payment-related processes like:
These attacks often exploit a combination of various threats. To address them effectively, suitable countermeasures must be implemented, tailored to the specific type of threat:
During the onboarding and provisioning stage, attackers may target client information present in an authoritative registry (e.g., postal address, mobile telephone number) or utilize stolen credentials, including the use of SIM swapping.
The Request-to-Pay and Invoicing phases are especially vulnerable to APP fraud or IBAN manipulation, including the tampering of QR codes.
The initiation and authentication phase are primarily vulnerable to malware attacks, which could be coupled with social engineering tactics. For example, customers might be misled into believing that a payment has been initiated or that an erroneous payment requires reimbursement.
The processing systems used for transaction validation and fund transfers are the main targets of attacks directed at the payment execution stage. At this point, distributed denial of service (DDoS) and advanced persistent threats (APTs) are the two main types of attacks.
What is Request money fraud?
Request money fraud is a recently emerged scam that has already resulted in significant issues in the modern era. It is associated with the 'request money' function found in various online payment applications. With this feature, individuals can ask you to pay a certain amount, and you reimburse them after verifying their authenticity.
Once you validate the request and ensure its legitimacy, you can click the 'pay' option and proceed by entering your UPI PIN. However, if the source appears unfamiliar, it is essential to reject the request and block the requesting account.
Why Webpays RTP?
Webpays "Request to Pay" is a payment security measure that aims to reduce Authorized Push Payment (APP) fraud and provide a more secure and convenient way for customers to receive and manage their bills and payments.
Here's is how it works:
Secure Invoice Delivery: With the help of an API integration, customers can securely receive their invoices directly from billers within their payment app. The communication channel between the app and the biller is secured, and the payee's identity is validated. This helps customers trust that the sender of the message is genuine and not a fraudster.
Full Coverage of Utility Companies and Suppliers: The platform claims to provide full coverage of all major utility companies and suppliers, which means customers can use the app to manage bills and payments from various service providers in one place.
Support for Vulnerable Customers: The platform allows customers to aggregate bills from all suppliers within the payment app, giving them the flexibility to pay who they want, when they want, and how they want. This can be particularly beneficial for vulnerable customers who may have difficulty managing multiple bills and payments.
Reducing APP Fraud: By offering an alternative to clicking on payment links received through social media, SMS, or email, the platform aims to bring down authorized push payment fraud. Such fraud often involves customers being tricked into making payments to fraudulent accounts.
Increased Engagement: The platform enables secure management of not just one-off transactions but a series of regular payments within the app. This can lead to highly personalized experiences for customers and increase their engagement with the app.
Simplified Integration: The platform connects to businesses via Request to Pay schemes in the UK and continental Europe, cloud accountancy platforms, invoice data feeds, and direct access. By delivering these integrations through a single API, it offers a future-proof solution for businesses.
Trusted Requests for Payment: Requests for payment are only received from trusted parties, which sets them apart from potentially fraudulent requests received through SMS, email, or social media.
Cost Savings and Enhanced Customer Service: By empowering customers to aggregate all their bills within the payment app, the platform aims to reduce call center calls and enhance customer empowerment.
Overall, the Request to Pay security measure is designed to create a more secure, efficient, and user-friendly payment experience for customers while mitigating the risks associated with APP fraud.
Conclusion:
The banking industry faces a rapidly changing landscape with the emergence of innovative payment trends and technologies. Embracing these trends, such as Request to Pay, embedded finance, instant payments, and virtual cards, will be crucial for banks to remain competitive and meet the evolving demands of consumers and businesses. By staying at the forefront of these advancements, banks can shape a more efficient and customer-centric payment ecosystem for the future.
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