The rise of real-time payments has triggered a wave of payment modernization with global implications. Real-time payment (RTP) systems like The Clearing House RTP deliver nimble technology infrastructure that enables payment innovation for every participant in a transaction.
Request-for-Pay (RfP), which is a messaging capability paired with real-time payments, can deliver on the promise of a better payment experience and financial outcome for consumers, businesses, and the financial institutions that support them.
To offer additional insight into the real-time payments market in the U.S. and the value of RfP solutions, Volante Technologies sponsored a Mercator executive brief titled “The Essential Role of Request-for-Pay in Real-Time Payments Modernization.”
What are real-time payments?
The executive brief defines real-time payments as “a settlement system that moves transactions between accounts within seconds, is available 24×7, and when funds are received, the transactions are irrefutable.”
The Clearing House RTP and anticipated FedNow Instant Payments fall under the category of RTP networks. Other faster payment systems, like Zelle, Mastercard Send, and Visa Direct, exist in the U.S., but don’t meet every component of this definition.
A common characteristic of RTP solutions is the use of credit-only push payments. That means that transactions are initiated through an account credit, and debits are not permitted. The payer authorizes every transaction, giving permission to “push” funds from their account to someone else’s.
What are Request-for-Pay payments?
While a credit-only push solution is more secure and effective in limiting fraud, it impedes use cases where debit is the norm. To address this gap, The Clearing House created a set of messaging standards that collectively make up an RfP transaction.
RfP is a service that delivers an online or mobile message to an account holder requesting a payment. The payer approves the request for funds, which pushes the funds to the requester’s account through a real-time payment.
RfP transactions benefit payers, payment requesters or billers, and financial institutions alike. For requesters, RfPs automate transactions and save costs—billers can save an estimated 8% of their invoice processing cost per item. RfPs also reduce the incidence of invoice fraud and scams that are often perpetrated through older, less secure billing methods.
Payers benefit by being able to pay their bills immediately, which can help them to avoid late fees, fines, and disruption of services. It also gives them more control over when bills are paid and helps them manage cash flow.
Financial institutions can offer this modern service to provide convenience and transparency for their customers and generate new revenue streams.
The Dos and Don’ts for Banks Considering RfP
There are a number of key strategies financial institutions should take into consideration when creating RfP strategies. Each of these key points are fleshed out in significantly more depth within the executive brief:
- Learn before committing to a plan.
- Conduct a careful analysis of all supporting systems.
- Define which systems require modernization.
- Strike the first draft of your plan.
- Identify your partners.
- Plan an approach.
- Fail to educate the front-line team.
- Neglect the end user experience.
Now is a good time for financial institutions to begin modernizing their payments infrastructure. The payments industry is evolving rapidly, and RTPs and RfPs will be foundational to offer new products and services to customers.
By working with the right partner, financial institutions can determine the best strategy for introducing real-time payments. A well-planned and executed modernization approach offers banks opportunities for new revenue streams, improved efficiencies, and client growth.