Request-to-Pay: Europe’s new payment standard

SEPA Request-to-Pay contributes to the dematerialization of payment exchanges and processes. This new pan-European standard (ISO 20022) is primarily designed to simplify the management of payments for invoices issued by companies.

In practical terms, RTP is a bank messaging service enabling a creditor to send a payment request to his debtor. Request-to-Pay is not directly linked to a payment method; the request is independent of the method. Rather, it is an initiating service that completes the SEPA Credit Transfer (SCT) breakpoints.

RTP is mainly dedicated to electronic invoice payment and debt collection.

In 2019, almost 80% of business payments in Europe will be made via bank ^transfers1. However, this method is difficult to integrate into a 100% digital payment process. And that’s a problem today. With the reform of generalized electronic invoicing for businesses, the French government is pursuing its policy of accelerating the digital transition. Businesses subject to VAT must therefore adapt in order to be able to issue and receive digital invoices, by 2024.

This new legislation is a real opportunity for the development of services such as SEPA Request-to-Pay. This is part of a drive to digitalize exchanges and improve the traceability of cash receipts. It can be integrated with a dematerialized invoicing solution, and is complementary to the usual payment methods used by professionals (SEPA transfers and direct debits).

The Request-to-Pay process has been set up to facilitate monetary exchanges, in the event that a creditor wishes to claim payment. The latter sends a payment request via an RTP message to the payer, who must then validate or reject the transaction on his bank account.

Step-by-step process :

#1. Sale of a good or service (online / offline) between a creditor (beneficiary) and a debtor (payer)

#2. The creditor fills in the information required to create the RTP message (amount, invoice reference, validity date, etc.) and sends it to the debtor.

#3. The debtor receives notification of the pending payment request.

#4. He identifies himself to his bank in order to validate or refuse the transaction.

#5. If he authorizes it, the creditor receives confirmation of acceptance. The debtor undertakes to pay the invoice by a given date.

#6. If the debtor pays by SEPA credit transfer from his bank, the beneficiary recovers the associated invoice references in his transaction.

In early 2018, PSD2 (the European Payment Data Directive) introduced payment initiation (PIS); a new way of triggering a payment order. RTP and PIS operate on different technical and economic models.

Payment initiation is therefore based on the European obligation to open up banks’ information systems (Open Banking) and share customer data with third parties, thanks to an AIS / PIS API system (Account Information Services / Payment Initiation Service).

Thanks to this openness, payment initiation offers another alternative to supplement the breakpoints of conventional SEPA payment instruments. The creditor can now send a payment request already enriched with the necessary debtor data (amount, beneficiary IBAN, invoice reference, etc.). As with 3DS authentication, all the customer has to do is accept the funds transfer from his or her bank account. This system offers a 100% digitized process for the debtor and seamless traceability for the creditor (eliminating the risk of human error).

Step-by-step process :

#1. Sale of a good or service (online / offline) between a creditor (beneficiary) and a debtor (payer).

#2. The debtor chooses the payment initiation in the beneficiary’s payment tunnel, then selects his bank.

#3. The terms of payment are sent by API to the debtor’s bank.

#4. They are redirected to their bank’s web page or mobile application, where they authenticate themselves, view the payment details and accept the transaction.

#5. The debtor’s bank issues the funds transfer (classic or instant SEPA transfer) to the creditor.

We note that the objective of Request-to-Pay and payment initiation is similar: to digitize the payment process and provide creditors with greater traceability, but their technical approach and scope of use are different. SEPA Request-to-Pay is mainly used for invoice payment and debt collection, while payment initiation also meets the needs of e-commerce and in-store payments.

Today, these technologies are still in the process of being implemented, although payment initiation has a head start thanks to the complete opening up of APIs by banks in the UK, France, Germany and, more generally, Northern/Western Europe.

As a European standard, Request-to-Pay does not necessarily imply Open Banking. However, its implementation and commercial distribution model have yet to be clearly defined.

With Smart Collection, you benefit from a high-performance Payment Request system that can be integrated with your dematerialized invoice solution, including multiple payment methods such as payment initiation.

You control your customers’ payment paths by creating lettered payment links for each of your invoices, and CentralPay automates the sending and reminder of invoices by email or SMS. Your customers pay more easily online using their preferred payment method (credit card, SEPA credit transfer, SEPA direct debit, initiated payment). The payment link ensures seamless traceability, automatically reconciling all incoming funds to your account, even transfers with no references or incorrect amounts.

👉 To find out more about SEPA Request-To-Pay, click here

As an Electronic Money Institution, CentralPay supports corporate financial departments in the implementation of digitalized payment services, designed to facilitate your end-to-end customer payment management and debt collection.

¹ Source: https: //www.paymentscardsandmobile.com/card-payments-the-preferred-payment-for-both-consumers-and-merchants/