When The Clearing House (TCH) launched the first new payment rail in the U.S. in over forty years, most of the focus (rightly so) went to the money movement functionality of the system. TCH’s RTP® Network officially brought the U.S. market to the modern money movement scene. Finally, we had a real-time payment system where money could move from an account at one financial institution to another “instantly.” At the same time, another less-heralded functionality was introduced, and until the last few weeks of news, was largely out of the public eye. That functionality has the potential to revolutionize the bill payment space as we know it, and it is called Request for Pay (RfP).
Globally, Request to Pay (as it is known in the U.S.) is an emerging “payment” channel. It’s important to note that all of the real-time payment systems globally are based on a credit push model, meaning that the individual or company paying must initiate the transaction. Therefore, you can’t give a company permission to debit your account in the same way the ACH network works. This design is to help mitigate fraud, which is an important feature due to the irrevocable nature of real-time payments. However, without debit functionality, there’s no way for a company/person to send a “request” to be paid for a good/service. For example, if applied to a P2P scenario—a request to split a dinner tab or concert tickets. The solution was to initiate a request that can be sent directly to the recipient’s financial institution through the payment network, turning the payment rail into a super messaging system as well!
The potential utility for RfP is significant—around 65% of the 15 billion bills consumers pay annually are not recurring payments. They’re performed as a one-time exercise. And about 75% of those non-recurring bill payments are done through a biller website. That’s a lot of user names, passwords, and inputting of information for each consumer—a stark contrast to the centralized RfP experience.
Many of you likely have already experienced this workflow in the closed-loop P2P offerings we all use in our personal lives. When you open up the app to send money to a friend, there are options to pay someone or request to be paid. Now imagine this at a grand scale where the request can actually go to ANY bank account in the U.S., and you can see why both financial institutions and businesses are so intrigued. This capability unlocks the possibilities for both consumer bill payment experiences as well as business invoicing and treasury payables and receivables. The functionality is not only in TCH’s RTP network but is also supported by Zelle and will be a key concept in the Federal Reserve’s FedNow network.
In some markets, non-bank RfP solutions are already available and target businesses directly. So already, it’s important for credit unions to take this opportunity sooner than later. RfP holds a lot of promise, allowing credit unions to create new revenue streams and engage consumers in a new way.
Learn about the different ways your credit union can connect to RTP in RTP: How to Connect?