Consumer Payments: Will ‘Request for Payment’ Be the Next 'Big Thing'?
This week, NatWest announced that it has teamed up with British mobile phone retailer Carphone Warehouse to trial a new online shopping system that lets customers pay directly through their bank account, without using a debit or credit card.
When checking out on the Carphone Warehouse site, shoppers are presented with a NatWest button that they can press to be taken to the bank's app, where they log in and complete the payment. NatWest says that the pilot has already proven a big hit with customers, cutting purchase times and ensuring that bank balances are accurate immediately.
NatWest is the first UK bank to launch this truly innovative payments service, leveraging Open Banking-compliant APIs and a direct connection to the UK’s Faster Payments Service.
The core concept behind the new technology is ‘Request for Payment’: The person or entity that wants to be paid for goods or services asks to be paid via a trusted third party who then routes the payment request to the consumer’s bank. The bank then uses a secure mobile app to present the ‘Request for Payment’ to the consumer so they can choose an account, check the balance, and make the payment.
‘Request for Payment’ - the next revolution?
With the advent of Open Banking and the much more widespread use of Open APIs, ‘Request for Payment’ technology is set to revolutionize lives for millions of UK consumers and businesses. We expect similar services to launch across the UK and Europe, made possible through Open Banking, the wider pan-European PSD2 regulation and the roll-out of several new Instant Payments schemes.
‘Request for Payment’ services complement existing ways to pay and benefit consumers, small businesses, charities, larger corporate users and government—allowing consumers and businesses to change payment dates to suit their needs. It could, for example, include warnings for consumers and businesses about upcoming bills. The US has already launched a similar service (in 2017). Of course, this new technology (also called real-time debit by some) would not be possible without real-time payments.
There are several existing and emerging ‘Request for Payment’ products and solutions in the UK and around the world, such as the PaybyBank app by Vocalink. UK Faster Payments is also working on a solution.
How does ‘Request for Payment’ work?
Let’s say you have agreed to pay your gas and electricity provider to pay per ‘Request for Payment’ instead of direct debit standing order. Your provider would most likely send you a request as an app notification on your mobile.
You (the consumer) would then tap or swipe to open the authorization screen. Key information about the requested payment would be displayed and a thumb print reader enabled on that screen. The consumer would check the information, press thumb to the reader, job done - 1 screen, 2 taps, 3 steps - request paid!
What are the advantages of the new payment technology?
Changes in working patterns (self-employment, multiple employments, zero-hours contracts) have led to increasingly unpredictable and sometimes irregular income streams for some consumers. This makes established methods of payment (Direct Debit/Standing Order) less suitable when trying to balance the irregularity of their incomes against the regularity of their bills. The same applies to those on low incomes who today often use a ‘cash-pot’ to manage income against expenditure or millennials who have grown up using a mobile phone prepay account as their first experience of ‘money management.’
What all these consumer segments (and probably others more widely) have in common is a need for control of when and how much they will be debited.
As the industry adopts real-time payments and ‘Request for Payment’ technologies, standards will emerge that define the best practice experience. I believe that the new technology has the potential to revolutionize payments, helping millions of consumers and billers to manage their payments better, as well as fintechs and retailers to enable new innovative ways to purchase goods and services.
The proliferation of real-time schemes globally will enable new innovative services in the banking and retail sectors and further disrupt the current global payments ecosystem. Find out more in our whitepaper: Real-Time Payments: Value Realization is Here.
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