The curtain call

Adam Smyth from NatWest, PayUK’s Simon Brooks and Louise Shorthouse from Icon Solutions, explore why Request To Pay is still waiting in the wings, and what more can be done to put it in the spotlight

A new digital payments system aimed at being fast, flexible, secure, data-rich, available to those traditionally underserved by banks, and with the added benefit of communication between payer and payee, came into being in the UK last year.

Pay.UK’s Request To Pay (RTP) secure messaging channel has been built to overlay the UK’s existing payments infrastructure for ease of incorporation and interoperability. But, despite it sounding like a potential gold standard, take up, so far, can only be described as patchy since its launch in May 2021.

According to a detailed international survey of industry stakeholders by payments fintech Icon Solutions, while almost 70 per cent of respondent banks and payment service providers (PSPs) saw the potential of RTP, only 18 per cent already offer it, and only a little more than a quarter of them (27 per cent) intend to do so within the next 12 months.

The biggest obstacles to doing so were banks’ readiness (67 per cent), the need for secure customer authentication (54 per cent), and needing message standardisation to promote simplicity and interoperability (48 per cent).

More than half of respondent banks and PSPs (54 per cent) listed limitations of existing technology and systems as holding back any RTP rollout, while fewer than half (48 per cent) had a clear strategy for adoption.

On the plus side, nearly three-quarters of respondents (73 per cent) agreed that demand for RTP from corporates is increasing; and that corporates have most to gain (75 per cent), followed by merchants (70 per cent).

In the UK, RTP’s ability to help democratise digital payments has been highlighted from the get-go: its first certified provider, and the first to perform a live transaction, was digital platform Answer Pay, which was specifically founded to help the growing numbers of businesses and workers in the often financially under-served gig economy.

Simon Brooks, faster payments service line manager at national payments authority Pay.UK, which moves more than £6.7trillion annually, says it has taken a holistic approach to creating the RTP service.

He explains: “Unlike anything else I’ve ever done in the payments industry, we’ve

actually gone out and researched exactly what consumers want, what corporates want, whether large or small, what the banks want, what building societies want, what even the fintechs are looking for, in terms of development in this space; and also government as its really important for the collection of bills, taxes etc.

“The version in the UK is a bit more advanced than the one in Europe, in that we can allow five different options to take place, which is pay all, pay some, decline, request an extension or communicate.

“We’ve done that because most RTP propositions out there today, if not all, are basically driven by sending an email or a text, with a link within that, and I’ve spent 30-odd years in the banking industry telling people not to click on links, or give out information, such as account details.

“So, when we started to build the RTP proposition in the UK, foremost in my mind was making sure that we keep it safe and secure. That’s imperative because fraud in the UK is going through the roof and we need to do something that enables the users, both billers and payers, to have confidence that what they’re receiving is coming from a bona fide source, and to allow the biller to receive the information that they need to reconcile that bill.

“That’s why billers typically like direct debits,” says Brooks, “because they do all of those things for them; they give them the reconciliation information they need and they don’t have to spend vast sums of money trying to reconcile millions and millions of payments.

“When we built RTP, we wanted to replicate all of the good things that exist within the payments industry today, but also incorporate security features that will make it safe and secure.”

NOT WITHOUT CHALLENGES

That threat of fraud cannot be overstated. Late in 2021, UK watchdog the Financial Services Ombudsman reported a 30 per cent year-on-year rise in complaints about financial scams. The majority of those were associated with authorised push payments (APP), where victims are tricked into making a bank transfer to an account used by fraudsters masquerading as a legitimate payee.

“I can’t promise that RTP will prevent fraud completely, but it will definitely help,” Brooks adds.

So, given RTP’s huge potential to provide an alternative to long-established payment methods, such as direct debits, cards, cheques and cash, why is there an initial reluctance by major banks and PSPs to get onboard?

Adam Smyth, the domestic sterling scheme and innovation partnerships lead at UK banking giant NatWest, re-emphasises one theme in Icon Solutions’ poll findings: that, rather than solely having an RTP strategy, banks are pitching it into a forthcoming tidal wave of developments and requirements, including the evolution of open banking, advances in digital identity, the introduction of ISO 20022 and that of the UK’s overall New Payments Architecture (NPA).

Respondents [to our survey] felt there was a much greater demand coming from corporates [for RTP] than from retail customers

Louise Shorthouse, Icon Solutions

Smyth adds: “I think what may have stymied the adoption of RTP was the initial view that it was a replacement for direct debit. Yet the key thing here is – which is what the team at Pay.UK have been really pushing – that this is an alternative, it’s complementary, it should be seen alongside that service.

“We’ve got a lot to think about around direct debits as we get into the NPA. I don’t think anybody has a full answer to that at this moment in time, but you can see how RTP could support that as, initially, a complementary service or proposition, getting people comfortable, helping them to move from the physical to the digital.

“There’s a whole education, onboarding, and a comfort journey we have to go through here, from the commercial customer through to our retail customer.”

AN UNSUNG STAR?

Louise Shorthouse, payments consultant at survey provider Icon Solutions, believes RTP’s lack of public awareness is also a significant factor in its slow take up.

“Respondents to our survey felt there was a much greater demand coming from the corporates, but fewer than half felt that demand was coming from retail customers,” she says.

“I think the reason that most people in the street aren’t really aware of RTP yet, is that people like your gran and your parents don’t really know what it is. And until the products are out there, I’m not sure awareness is really going to rise that quickly.

“I appreciate that there’s a bit of a chicken-and-egg situation there but it reminded me of when Transport for London introduced contactless payments for tickets. I didn’t know I wanted or needed that, before it was out there; but now I don’t know how I would live without it, and it’s really changed the uptake of contactless payments.

“In terms of the benefits, what the survey found was slightly different depending on the segment. When it came to corporates, it was felt that it improved reconciliation, visibility and real-time cashflow, and, actually, those benefits do cross to the customer segments.

“For merchants, it reduced dependence on cards and card fees – a big topic with the Visa and Amazon conflict – and created more choice for customers.

“For retail customers, again, more choice, flexibility around the date of payment, and, overall, an enhanced customer experience.”

Brooks agrees that a fast-changing world in which many workers face uncertain or irregular incomes, firmly presses the case for change.

“People now want choice,” he continues. “In our research, millennials are saying ‘we don’t like direct debits. We want something that gives us more flexibility’.

“Therefore I think the adoption of RTP needs to come from the UK economy, if you like, from UK PLC. It’s not just Pay.UK that is going to deliver this. We need support from the banks, from the fintechs and from the likes of Icon Solutions; we need them to take up the baton.”

Spotlight on banking:

Consumers want options beyond direct debit and card

Brooks also believes that there will eventually be a tipping point when a bank, either an incumbent or a challenger, offers RTP in realisation that it provides a commercial opportunity as well as fulfilling a customer need.

“There’s enough noise about it now to say it’s going to happen. I think we’ve got something that offers more versatility, more flexibility, more control, and UK PLC can deliver a world-beating proposition,” he says.

When it come to democratisation, both Shorthouse and Brooks see not only banks but also some big billers like energy companies and, possibly, retail giants, using RTP to help people on low or irregular incomes get better value.

We’ve something that offers more versatility, more flexibility, more control. UK PLC can deliver a world-beating proposition

Simon Brooks, Icon Solutions

Indeed, Brooks adds that helping to deal with the ‘poverty premium’ was front and centre during RTP’s development. Providing the same reconciliation information as a direct debit, it should enable utilities and large companies to offer similar payment discounts to RTP customers, he argues.

From his banking perspective, Smyth ventures that the use of now publicly accepted and trusted technologies like QR codes – something he says NatWest has been testing for payments for at least five years – could both drive the adoption of RTP and expand its consumer, peer-to-peer and business-to-business use cases as well as cross-border.

“There are opportunities to overlay other services on top of it, say with financing, like buy now, pay later (BNPL); there are opportunities to upsell, to link to open finance. Banks have opportunities to offer additional products, but customers also have opportunities to get the right product at the right time.”

Shorthouse also argues that forging partnerships with third parties, including fintechs, will be essential for banks to successfully implement and utilise RTP.

“The banks are facing so much change at the moment – I know one of the executives we spoke to talked about change congestion – so, partnering with the right fintech, the right third party, will help them get those products out to market quicker,” she says.

“And, because fintechs are increasingly specialising in RTP, they’re also going to be able to help you develop these into fully-featured products. I think RTP is going to be part of bigger products, not just on its own.”

“We know from the pandemic that our supply chains are evolving, so, as you develop new relationships is RTP, for cross-border, the way to generate that trust?“ he asks.

“And also, from an ISO 20022 perspective, what more can go into the payment request that can create those simple, efficient consumer, peer-to-peer and business cross-border processes?”

Brooks is confident RTP will quickly morph into cross-border payments after it conquers domestic markets, and there will be a continual development of message contents by governments, banks and fintechs, to enhance its uses. And he has this prediction: “Crystal ball-gazing, I would say within the next three-to-five years you’ll see RTPs appearing cross-border. It’s going to happen. If we don’t do it, and if we don’t set some standards around it, then it'll be a bit like the Wild West and this will allow the fraudsters and the gangsters of this world to come in and manipulate it, and we’ll lose a bit of control.

“SWIFT is a brilliant example of a messaging service that sets the standards for the world. Every organisation around the world, particularly banks, utilises that service to send messages, and it’s pretty safe and secure.

“Here in the UK, we’ve built RTP so that it can accommodate BIC (business identifier code), IBAN (international bank account number) and ISO 20022 capability. And the other difference, from any other proposition around the world, is we’ve made it payment-agnostic, so you can pay using Faster Payments, debit and credit card, PayPal and even, to some extent, cash.

“We think we’ve built a really solid RTP proposition, here in the UK, and we’ve also future-proofed it in the global proposition that we’ve put together.”

Shorthouse also sees other use cases for RTP as an overlay service.

Crystal ball-gazing, I would say within the next three-to-five years you’ll see RTPs appearing cross-border

Adam Smyth, NatWest

While acknowledging that there’s lots being thrown at banks, Brooks argues that RTP can help rather than hinder that process. And he concludes with this message: “It’s down to the banks now to say ‘what do we want out of RTP?’

“Talk to us, talk to Icon Solutions and all the other providers to find out what it is we’ve got to offer and what the propositions can offer your customers, both on the personal side and the corporate side.”

It’s a compelling sales pitch.