Under public pressure to limit overdraft fees, banks are examining whether enabling billers to send digital invoices that can be paid instantly — and only when funds are available — could help customers.
Request for Pay, a system that allows a digital invoice to be attached to a real-time payment, enables consumers to move funds to pay a bill at the moment it's received or schedule a real-time payment at a specified time. Some banks have begun offering RfP to ensure funds availability when the payment is sent.
"Request for Pay is more visible. The consumer gets messages and can control when a payment is made and see that payment," said Andrew Ducker, a payments consultant for Icon in London, which released data that suggests Request for Pay can upend established card-focused payment methods. "They know if they have enough funds to avoid overdrafts, and they can easily know if another option costs less."
An Icon survey of more than 50 global banks and payment companies released in January found 87% viewed RfP as a good alternative to direct debits and 71% found it will reduce a merchant's dependency on payment cards. And Javelin Strategy & Research reports consumer demand for real-time payments closely matches the benefits of real-time billing.
Eighty-six percent of consumers say it would be beneficial if banks offered real-time billing, according to Javelin, with 54% saying it would help reduce late fees and more than a third of consumers saying it would help delay bill payments until they had a proper account balance.
But Icon reports only 18% of global banks offer the service. The survey found that 67% are concerned banks aren't ready to support RfP, 54% want improved authentication, 48% worry about a lack of standardization for billing and payments in real-time, and 46% cite user experience as a hurdle.
"There is an infrastructure investment program that's required to gear up for [RfP]," Ducker said, adding that if a bank has upgraded its payment platform over the past three or four years to accommodate e-commerce payments, there's a good chance the tools to support real-time billing are already in place.
'The power of the payment'
In the U.S., a group of
"There's a lot of potential uses for Request for Pay," said Chris Ward, executive vice president and head of treasury management, product management and operations at PNC. "It puts the power of the payment with the consumer. There are huge long-term advantages to that. People can pay when they have the money and that helps avoid overdrafts."
PNC in April debuted
PNC is also developing new use cases for RfP.
"We're in the first inning," Ward said, adding that payroll providers receive funding from their clients faster, or moving funds between businesses in cases where certainty over liquidity is needed.
By matching payments directly to available funds, overdrafts can be reduced, according to Tim Ruhe, head of real-time payments and partnerships at Fiserv, which is developing RfP technology for its client network of about 12,000 financial institutions.
"The transaction won't happen without the money being there," Ruhe said. "With a request for pay, the funds are there or they aren't."
Jack Henry supports real-time payments through its JHA PayCenter, a proprietary hub that offers a quicker, less expensive, and more efficient conduit to faster payment networks, said Rusiru Gunasena, managing director of the JHA PayCenter, in an email. The hub connects to Zelle and the Clearing House's RTP Network, and will also offer connections to the Federal Reserve's FedNow faster payment rail when it launches. The Monett, Missouri-based Jack Henry's first implementations using RfP via Send (Jack Henry's electronic billing product) are in development, and the bank technology company expects the first products to be released in the coming months, Gunasena said.
U.S. Bank’s [RfP] implementation will help remove billing pain points that have long existed for businesses and consumers, Sam Robb, a Pittsburgh-based senior vice president and head of receivables product management at U.S. Bank, said in an email. In the case of an RfP overdraft, the payment does not go through and the payer receives a notification that they need added funds for an RfP.
U.S. Bank said use cases include property management companies providing an alternative to paper checks, insurance companies reducing policy premium payments by check while offering instant policy payments, utility billing, and food or beverage delivery services using instant settlement.
An alternative to payment cards?
While banks seek to reduce overdrafts,
RfP could reduce the amount merchants pay in card fees by providing a new alternative, according to Ducker at Icon.
"A checkout button on a website could trigger an account-to-account payment, for example, which is an alternative to a credit card payment" Ducker said.
Early RfP deployments are mostly tied to utility bills, but there are potentially dozens of use cases, according to Ducker.
There's still IT work to be done before RfP can expand. In the Icon survey, 67% of respondents said bank readiness and limitations of existing technology were barriers to the adoption of real-time billing.
"There is an infrastructure investment program that's required to gear up for [RfP]," Ducker said, adding that if a bank has upgraded its payment platform over the past three or four years to accommodate e-commerce payments, there's a good chance the tools to support real-time billing are already in place, which could mitigate the work required.
Most of the current work in RfP is in building capabilities to support an expanding range of uses, according to Peter Davey, senior vice president and head of product innovation at The Clearing House in Washington, D.C. The challenge for most financial institutions is waiting for their vendors to roll out and publish the updates, Davey said.
RfP operates on The Clearing House's RTP network, which has more than 150 financial institutions covering 60% of all U.S. bank deposits. About 41% of digital U.S. bank accounts should have access to RfP by the second quarter, Davey said.
There is a potential to combine or bundle these use cases, Davey said, by paring real-time payroll with invoices. "The more requests there are the better to manage balances and make payments when the money needs to be paid," Davey said.
The next step for The Clearing House is connecting Invoices to bank partners' enterprise resource planning and accounting systems, which would enable RfP to be part of payment approvals for business transactions. "You'll see more end to end automation on the transaction," Davey said.
Fiserv is part of the group of about two dozen banks and technology companies that have agreed to support RfP through The Clearing House's RTP network. Fiserv's Ruhe said there are several primary use cases for RfP. Fiserv currently offers digital payment requests through its electronic billing service but is in the process of standardizing that service to fit the RfP provided through the RTP rail.
"Small businesses are a good fit because their invoices tend to be simple and direct between a consumer and the business," Ruhe said. "There's a relatively low barrier to adoption because there's a lot of people already using Zelle."
The bank technology company supports RfP through the bank-led Zelle network, and has a "couple dozen" financial institutions that are live with a small-business billing RfP service through Zelle.
Other payment types under development for RfP involve adding speed for bank-to-bank transfers and standardizing supply chain payments.
"Supply chain payments have a fragmented ecosystem now for invoicing and getting paid," Ruhe said. The RfP combined with the RTP rail can support B2B payments with similar processes and messaging, he added.
As a relatively new payment type, RfP requires an adjustment for consumers and businesses, who are accustomed to getting invoices independent of making a payment.
"The key part of making this work is building it into the user experience," Ruhe said. "That's why you see that only a handful of financial institutions have deployed this so far and on a limited scale. It's early days. But we expect this to grow over time."
