SECTOR REPORT: CARDS & PAYMENTS
Will Request To Pay displace card payments in the future? The potential is there, but tech roadblocks prevent wider adoption.
A
lternative payment methods are increasingly becoming the norm amongst consumers, a move spurred by the pandemic, as health-minded individuals seek to avoid physical contact. According to Mastercard’s New Payments Index in 2021, 94% of consumers in the Asia Pacific region say they will consider using at least one emerging payment technology in the next year. Whilst most physical payment service providers (PSP) in the region are zoning in on emerging payment methods such as buy now, pay later— which is expected to represent 12% of all e-commerce sales in APAC by 2023, according to Boston Consulting Group—and QR code payments, there is another emerging solution that is sighted to directly challenge debit card use: Request To Pay or R2P. A global study by payments solution provider, Icon Solutions, found that over eight in 10 (87%) of the 50 financial industry stakeholders it surveyed globally believe that R2P is a good alternative to direct debit. Over seven in 10 (71%) of the stakeholders also believe that it will reduce merchants’ dependency on debit cards. Almost the same number of respondents (73%) indicated that there is a demand for the service from large corporations. As a result,
Existing infrastructure does not have the flexibility to bring differentiated services to market quickly and safely
respondents shared that they are planning to leverage R2P to diversify product roadmaps. Request To Pay RTP refers to a payment solution wherein a payee can initiate a request for a payment from another person using a digital app or through any mobile device, according to a definition by real-time payments provider, ACI Worldwide. The payer then either approves or rejects the request, and if approved, initiates a real-time credit transfer to the payee. It is said to be the next upgrade in real-time digital payments where merchants, billers, corporates, and even consumers can pull payments from end payers and customers. “Consumer banks can drive revenue through interchange income in markets that have a regulated pricing structure; government incentives in markets where regulators and government incentivise banks to drive adoption; and alternative revenue streams arising from partnerships with fintech, big techs, and social giants,” ACI Worldwide wrote in a report. Invoicing, payments reconciliation, and the digitalisation and integration of processes and systems identified as the leading emerging use-cases,
Request To Pay is an emerging solution that is sighted to directly challenge debit card use
24 ASIAN BANKING & FINANCE | Q2 2022
Icon Solutions found. Corporates are reportedly particularly keen to adopt the service as they believe it will lead to reduced cost of reconciliation (73%) and better visibility of real-time cash flow (63%), according to Icon Solutions. For merchants, RTP not just reduces their dependence on cards, but could possibly reduce costs for reconciliation, and improve payment choices for customers, it said. Limited action Yet despite the observed increase in demand for its services, banks and payment services providers have taken limited action to roll out R2P services. Fewer than one in five respondents, or only 18%, of banks surveyed already offer R2P services, Icon Solutions found. Of the banks, only 12% have plans to launch R2P services within the next 6 months and 15% within the next year. In the Asia Pacific region, few markets see financial players offering R2P overlay services to merchants and corporates, amongst them are India, Thailand, Malaysia, Hong Kong, and Sri Lanka. One of the financial centers in the region, Singapore, is notably not on the list. The adoption of R2P was likewise dismal amongst global players. As for why adoption has been slow, bank readiness was named as the top challenge by 67% of respondents. “Despite the undoubted potential of Request to Pay, technology transformation programmes remain notoriously difficult,” explained Toine van Beusekom, strategy director at Icon Solutions. In fact, one in two (54%) of surveyed banks and payment service providers identified the limitations of existing technology platforms and systems as a key challenge. “This reflects the fact that existing infrastructure simply does not have the flexibility to bring differentiated services to market quickly and safely. Successfully launching Request to Pay services will require a transformation of the underlying technology, as well as a broader cultural shift to embrace agility,” Van Beusekom said. Fraud is a particularly pertinent consideration for Request to Pay
