Dean Wallace, Real-Time & Digital Payments Product Management
Did you know that 65% of merchants want to accept instant payments? That’s because they recognise that this payment method will save their business money, and that the customer experience benefits will drive their organisation’s growth.
However, speed of payment alone is not sufficient to drive adoption of instant payments for consumer purchases. Embracing an Open API enabled, digital ecosystem is key to unlocking the benefits of real-time payments.
In order to drive the benefits of instant payments for merchants, payments providers must enable use-cases that drive consumer adoption at the Point of Sale (PoS) and in eCommerce environments. These use cases result from the evolution of the Second Payment Services Derivative (PSD2) ‘Open Banking’ mindset, where banks expose APIs to the market for processes such as account aggregation and balance enquiry. This is a key route for merchants, and billers, to get access to instant payments.
Another key way instant payments can be leveraged for purchases in the market is through digital overlay services such as Request for Payment (RfP). As consumers shop online, they are offered the chance to pay from their bank account, where they are seamlessly pushed from the shopping app to their banking app, which contains all their accounts from their financial services provider. PSD2 then offers the ability to add in accounts from other providers, resulting in an aggregated, single view, in a single payments app. Consumers can then select which account they wish to pay from, initiating an RfP from the merchant for their authorisation.
Request for Payment Predictions in Europe
The European market is obviously ripe for RfP, as PSD2 regulations drive the real-time payment and Open API capabilities needed to underpin the services. And consumers have stronger propensity to debit and direct from account services than other markets across the world. Indeed, there are some localised services and initiatives throughout Europe, but the region is lacking the schemes and regulations needed to drive RfP capabilities. The European Banking Authority (EBA) Clearing recently announced a Request to Pay Task Force to support the growth of a pan-European Request to Pay (R2P) solution, which is a step in the right direction. An important lesson learnt from PSD2 is that guidelines are not sufficient to encourage adoption amongst payments players. Clear rules and regulations are required to drive uptake, which also need to be launched rapidly in the European market to discourage competitive schemes and services.
As a relatively closed ecosystem, the Dutch market should be front and centre in Europe for RfP. The Big Four (France, Germany, Italy and UK) have already experienced some success in the eCommerce market with real-time transfer services, so an RfP overlay would capitalise on this and develop the service for both the consumer and merchant.
Although the UK drove its Open Banking initiative ahead of PSD2 deadlines for Open APIs, it still faces the challenge of a lack of governing scheme and rules to support an RfP model. There are services live, such as MasterCard / VocaLink’s Pay by Bank app, and also launching soon, Pay.UK’s Request to Pay (RtP) service expected to launch later in 2019.
Pay.UK’s RtP is an interesting service, as the driving guidance is the outcome of advice from the Payment Systems Regulator (PSR). Primarily targeted at the billing use case, it remains as if there has been enough emphasis on the customer journey. As an industry, it is common to tread the line between regulatory encouragement and design, balanced with competitive pressures that force payment providers to deliver on CX if they are keen succeed.
Although the European market is ready for RfP, there are still steps that need to be taken to fully support the RfP model and it’s vital that schemes and regulations be put in place in order to make the most of it. Only once clear guidelines have been put in place will merchants have the opportunity to fully embrace RfP and ultimately deliver the customer experience needed to succeed and drive the organisation’s growth.