Banks have never faced such competition. Nimble and well-funded fintechs, neobanks that can appear seemingly overnight, or the macroeconomic climate of historically low interest rates continue to provide the perfect threat storm. Digitization is no longer a question of “if”, nor even of “when”, but of “in how long”? Finding and using the next big thing has never been more important for a bank. And many predict that Request-to-Pay (R2P) fits that brief.
Indeed, R2P helps solve a problem affecting all businesses; namely, to be paid on time. Late payment impacts cash flow, administrative burden and litigation costs. While large companies with deep pockets may be able to handle the lack of cash for a while, they are hit harder by their size. In other words, the more invoices you send, the more the invoices are overdue, and the more resources and budget will be sucked up.
The next natural step in digital banking
Until now, the only way for banks to support their professional customers in this issue was to authorize direct debits. But it’s far from a perfect system. For starters, creating a Direct Debit Mandate isn’t hassle-free for the bank, hence why it’s not offered to all business customers (or offered at significant cost). For the payer, while the set-and-forget nature of a Direct Debit may seem appealing at first, the convenience advantage can be eroded when a payment schedule suddenly increases, as we are currently seeing with utility bills and general rising costs. of life.
R2P gives banks the ability to solve late payments for businesses of all shapes and sizes – from the multinational utility provider to the individual entrepreneur. But rather than just helping billers get their due, R2P also opens up additional revenue streams. R2P can also be used by businesses to market and process one-time purchases, upsells, or special offers. Additionally, the ease and convenience of making an R2P payment increases the likelihood that a customer will respond positively.
Plus, for a world now comfortable with digital banking, R2P is a seamless extension of our familiar payment tools. A “payer” simply receives a payment request via their banking application and can then approve, reject or query it. The first option will initiate the payment (usually instantly), while querying the request gives the payer the information they need before making this decision. This is a crucial upgrade as it removes the ambiguity that can lead to a valid payment request not being paid. Instead, the payer is more likely to request and receive the verification they need because they have the tool to do so literally in their hands when the request is received. Compare that to a paper bill that gets put aside until you have time to access it.
A simple sale that opens up new opportunities
Banks aren’t the only ones eyeing the R2P opportunity. With the emergence of Open Banking, it is becoming easier for non-banks to process payments. This cohort has already demonstrated the large market share it can capture in a short time. Banks should have no doubt that they are now in a race for R2P victories. But they have a wonderfully simple and compelling business pitch: “Who do you think your customers will trust with a payment request message: their bank, through the same app they use for all their banking dailies, or an unknown fintech?”
Smart banks will understand that R2P is not just about helping their business customers get paid on time. By inserting itself into the conversation between the biller and the payer, a bank has access to valuable data on both parties. It doesn’t take much to turn this information into recommendations for suitable banking products, be it retail finance solutions such as BNPL, personal loans or lines of credit, investments, digital wallets , wealth management services or many others.
Go fast, but not too fast
If R2P is the new banking opportunity, the next question is how to enable it? Traditionally, banks have built their own solutions in-house. But the convenient, seamless digital experiences businesses and individuals expect today are hard to achieve with bespoke, proprietary systems. This is why banks are turning to the “plug and play” approach on which fintechs have built their success; best-in-class capabilities, easily integrated together, able to work in any environment, and maintained by a third party. This is how they should enable R2P as well.
For starters, it makes R2P immediately available. There are R2P solutions today that a bank can simply log on to and start offering. But speed shouldn’t be the only requirement. If R2P only takes one slice of global bill payments, many billions of transactions will be settled with it. So you need a solution that can handle this scale in terms of availability, security, and configuration for different markets. Even better if you can access R2P alongside other banking services, delivered on a composable platform. And one that has the market reputation and track record that attracts others to collaborate and thus drives innovation and improvements.
Speed, scalability and security
That’s what Temenos has built with our new Request-to-Pay solution. And our recent partnership with Mastercard adds a new dimension that the solution can leverage alongside Faster Payments, Bacs and SEPA. It is even easier for banks and their corporate customers to accelerate adoption by linking Temenos and Mastercard services to access a complete end-to-end payment and communication mechanism between billers and payers.
We will soon be making R2P available on the Temenos Banking Cloud, along with a full suite of banking features including BNPL, digital mortgages, deposit accounts, anti-fraud tools and more.
R2P is the answer to the problem that businesses and their customers have been facing for far too long. Banks can be their saviors and reap new business and reputational benefits. Those with the best chance of success will strike first, but also team up wisely.
About Mick Fennell
With over 30 years of experience in banking software and over 20 years of experience in the global payments ecosystem, Mick is a highly skilled business and market development specialist. In his current role at Temenos, he is responsible for driving the global business growth strategy for Temenos’ award-winning payment offerings and supporting customers in their ambitions to scale and prepare for the future.
Temenos is the world leader in banking software. More than 3,000 banks worldwide, including 41 of the top 50 banks, trust Temenos to handle both day-to-day transactions and customer interactions for more than 1.2 billion banking customers. Temenos offers cloud-native, cloud-independent and AI-powered front office, core banking, payment and fund administration software, enabling banks to deliver seamless omnichannel customer experiences and reach operational excellence.