Your phone buzzes and you get a notification. It asks whether you’d like to pay for your coffee, you accept and pick up a latte from the cafe counter.
Some predict this messaging service — known as "Request to Pay" — is the smoother, more flexible future of payments between people and businesses.
“It’s a digital request that a payer will receive on their mobile device, usually on a banking or fintech app,” says Anders la Cour, chief executive of B2B payments bank, Banking Circle. “If approved, it automatically initiates real time credit to the recipient by drawing funds from the initiator's bank.”
There are a number of Request to Pay schemes, including PayUK and The European Payments Council, but it has yet to be fully launched.
PayUK estimates the service could save the UK economy over £1.3bn a year, so what do fintechs need to know about this new way of requesting payments?
It’s an alternative to cards, invoices and direct debits
For la Cour, Request to Pay is “one of the payment methods that could actually revolutionise the way payments are done” because it offers an alternative to cards. According to the European Central Bank, payment cards still total more than half of all non-cash transactions in Europe.
“For the last 25-30 years the most common payment method has been either cash or card,” says la Cour. “The legislators in the EU, UK and other places in the world would not necessarily like to challenge that but at least enable competition.”
Request to Pay could actually revolutionise the way payments are done
La Cour says the benefits of Request to Pay over cards include the ability to make ad hoc transactions in real time — which consumers are increasingly demanding — and limiting chargeback fraud, or when a consumer requests a refund while keeping the product or service.
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While Request to Pay is unlikely to completely replace cards, la Cour says the most important thing for fintechs is their client relationships and “the more attractive alternatives you offer your customer base, the better”.
A Banking Circle poll found most people think Request to Pay has the potential to facilitate change with invoicing, replacing the arduous traditional invoice. It could also be an alternative to direct debits, which could be combined with buy now, pay later schemes — and could be a new fintech trend to watch.
“A very strong use case would be if as a consumer or a business, you made a purchase, you would receive a Request to Pay notification for the purchased goods, followed by an offer to pay for those goods in instalments,” la Cour told Sifted in June.
La Cour says one of the reasons he predicts Request to Pay will take off is its potential for global adoption.
“Very few, if any, account-to-account schemes have been able to operate across different continents, across different countries,” he says. “Request to Pay has the potential to do that because so many countries are on board with the initiative.”
While growing in popularity across the UK and Europe, la Cour says India is at the forefront of the technology. The government United Payments Interface's "Collect" service has been live since 2016, while the rest of the world started to catch on in 2020.
However, to achieve a global reach, Request to Pay requires fintechs to partner with banks or companies, like Banking Circle, to enable the service across borders.
Room for everyone
According to la Cour, partnerships between fintechs and banks are key to the mass adoption of Request to Pay.
“For me, it’s one of the schemes where you have the best possible cooperation between fintechs and banks,” he says. “This is why I think it has the potential to get mass adoption because the banks have a role to play, fintechs have a role to play. There’s room for everyone here.”
La Cour adds this type of collaboration differs from other initiatives like open banking because banks play a much bigger role. So far, open banking has seen a slow adoption — with around 4m users in the UK, well behind predictions of 33m by next year — and backlash from banks such as Starling.
“Traditional banks play a bigger role in this space than in, for example, open banking,” says la Cour. “To get adoption historically, it’s always good to have all the incumbents in the marketplace on board.”
It’s early days
However, it’s important to remember that Request to Pay is very much in its infancy.
“It’s still early days and it won’t be launched this year,” says la Cour. “As far as I know the technical details and the technical scope have not been fully finished.”
When it will be finished is guesswork, says la Cour, but he advises fintechs to get ahead and start setting up partnerships.
“No one knows whether this will be adopted in three years or seven years and you don’t want to be too early or too late to the party,” he says. “But I think I’d rather adopt it too early than too late, and given that many fintechs and banks are our clients we’re making sure that technology is available for everyone.”