If I ignore it… will it go away? Is Request to Pay a flash in the pan?

“Payments are changing” is a statement or prediction that has been made in blogs such as this just about every year that I have been working in payments, which is longer than vanity allows me to say. To some extent, it’s always true, everything is always changing so payments innovation is going with the flow, but perhaps now there is something more. In this blog, I will take a look at the trends in payments and make some predictions for this year – as it’s early in the year and people will have forgotten this blog by April I think that I can make some bold predictions – so here goes.

Higher or lower - what’s in the box?

There is certainly evidence to suggest that Direct Debit is not serving us as well as it used to. Those in the gig economy and anyone with an uncertain income (which is unfortunately turning out to be quite a few people) are gradually turning away from Direct Debit and the lack of control. Still beloved by big billers, Direct Debit continues to play a major role but it is less and less likely to present the complete solution for any organisation.  Cash usage also continues its downward trend. Hoarded by some at the start of the Covid-19 pandemic but used a great deal less ever since. A Bank of England report suggests that there is not a great deal of evidence to show there is any substantial risk using cash but its decline is long term and unchanging.

Cheque usage reducing further from not much to not much at all shouldn’t surprise anyone who has been watching the market for the last couple of years. So what’s left? Faster Payments and Cards.
 

Faster Payments is going strong and continuing to grow, but is perhaps the only payment mechanism without a recognisable customer interface. Ask someone in the (virtual) street “What is a cheque? What is a payment card?” and they will have no trouble in letting you know – ask them what a Faster Payment is and they will perhaps struggle a bit more. More on this in a moment.

Card payments continue to remain strong, events of the last year have increased usage as more shopping goes online. To some extent cards have been the main story over the past 40 years – starting predominantly in the Travel and Entertainment sector, growing with the increase in e-commerce and most recently moving into lower value payments through the adoption of contactless.

What’s that coming over the hill?

Could it be that we are now seeing a successor to cards making an early appearance…? I did say I was going to make some bold predictions. Cards are great in a whole host of situations, I am buying a sandwich in a shop, I am paying for my holiday but cards are expensive and difficult to adopt for small merchants. So why not use Faster Payments? Simple – have you ever tried? Setting up a new payee involves jumping through multiple security hoops put in place to avoid “push payment” fraud and as a small merchant, I am not going to ask every customer for their bank details. There was no user interface on Faster Payment (or SEPA Credit in Europe) and it is here that the change has happened.

Request to Pay (RtP) puts the user interface on the front of the Faster Payment scheme both in the UK where Request to Pay services have been growing over the last year and in Europe where the RtP Rule book was launched in November with RtP running on SEPA instant credit. It is tempting to suggest that this will result in rapid changes as RtP is secure enough to pretty much eliminate push payment fraud while still retaining all of the benefits of Faster Payments. If I am a biller RtP provides me with an instant, cheap and secure solution for, at least, every instance where Direct Debit is not the right answer, and as we have seen there are more and more of these. If I am a payer it is mobile friendly, quick and secure. So what’s the hold up?

As we have seen in the past new payment mechanisms are never quickly adopted. How long did it take for people to move to cash from the tried and trusted bartering of chickens? The adoption of chip and pin or contactless was not much faster.

Here is the question, if it were Request to Pay that had always existed and card payments were the new innovation how often would we say that card payments were an improvement. In a café to pay for my lunch – yes possibly, to pay for my annual holiday where my chargeback rights are important – again, at the moment this looks like the best option. But if I am a small merchant selling goods over the web, or a garage mending people’s cars or a call centre taking one off payments for single services – do cards with their high charges, delays in settlement and stringent PCI DSS security requirements look like the best option there? I would suggest not. You can’t stop progress as they say. So my guess is whether adoption is fast or slow Request to Pay is here to stay.  It has probably got a bit of evolution still to go through, there needs to be some consumer protection (against a merchant’s failure to deliver), but while in the 1970s cards were the only solution to the question “how do I pay in real time” Request to Pay now provides another and often better answer.

The take away is that RtP with its low barrier to adoption, works on existing payment rails and is cheap. I personally believe (and I am more than happy to hear arguments to the contrary) that early adoption will be rewarded. At CGI through our partnership with Ordo we have been in conversations with our customers and have started running live pilots. The feedback has been positive. We have joined in, sending our first CGI corporate invoice using Request to Pay. The UK has led in this field so far but Europe is now hotting up. Cross border payment and alternative payment rails are also being discussed.

We are interested in continuing these conversations and sharing our experiences so do feel free to drop me a line, as spring arrives it is not only the flowers that that are growing.