Request to pay (R2P) solutions: a brewing revolution in Swiss digital payments
What is request to pay?
Request to pay (R2P) is a secure payments framework, which offers a new and flexible way to settle payments between businesses (B2B) and consumers (B2C or P2P). The payment flows through a network in which the payer receives a secure digital message with an invoice or a payment request triggered by the payee. When receiving the request, payers have the option to make the payment immediately, postpone it, or request to pay in instalments (both online and at the point of sale in stores) via buy now pay later (BNPL) offerings for B2C. BNPL is gaining momentum globally as well as in Switzerland.
This blogpost is the second in our series dedicated to 'The future of payments in Switzerland – strategic outlook for financial and payments services executives'. Read the first post - What could the roll-out for instant payments mean for Switzerland? Three evolutions to consider.
What are the key benefits of R2P and how can it transform the Swiss digital payments ecosystem?
R2P could resolve challenges with existing pre-transaction solutions such as paper invoicing, direct debit, e-invoicing, marketplace invoicing and bill-splitting. These solutions currently have poor processes for making amendments and can be manually intensive, giving less flexibility to payees and payers.
Main benefits of R2P for different stakeholders could be:
- Swiss banks can increase revenues by studying the offering of R2P services such as eBill** to their corporate customers, allowing these to issue invoices to their customers. Banks can also collect and monetise data from R2P payments (e.g., identification of customers’ key ‘moments of truth’, affiliate marketing) or creating cross-selling opportunities. Wider integration with European SEPA R2P schemas will enable broader R2P adoption and provide benefits for cross-border payments.
- Retailers can increase revenues and reduce payment attrition by studying the use of R2P to allow consumers to pay only after delivery of goods. This can further reduce the costs with chargebacks. Furthermore, with instant payment (IP), R2P payments can be settled immediately offering new opportunities for point of sale and online payments offerings*.
- End users can be offered an improved customer dialogue and overall experience (i.e., efficient digitalisation enabling faster execution). It also increases the payment options available to the end user.
- Corporate and institutional clients can improve their liquidity management by invoicing corporate and retail customers using R2P for more instant settlement of payments. For recurrent or periodic payments, if they use R2P solutions they can reduce their operational costs with direct debit or card chargebacks, especially when using a standing approval capability, available with services such as eBill**. Finally, e-invoicing is now mandatory in Switzerland and the EU. Coupled with R2P solutions this can greatly improve the settlement of invoices.
*further details on this series’ first blogpost on IP.
Current examples of R2P in Switzerland include:
- **eBill is a digital invoice service provided by SIX for more than two million registered customers and is accepted by most Swiss banks. It enables corporates to send invoices, by paying a fee to eBill providers, to banking customers which can receive and pay them directly at their online banking. Similar solutions exist in other countries, such as eBill in the US, PayUK in the UK and BPAY in Australia.
- TWINT supports online, in-store as well as P2P payments via smartphone and is currently used by four million users with 200 million transactions per year.
- QR code billing in parallel with the above R2P services has been the most common feature of a B2C R2P arrangement in Switzerland, enabling immediate payment via online banking of an invoice by scanning a QR code. Since 30 September 2022 all invoices are required to have this feature replacing the previous invoice model - the orange slip.
Why should banks and merchants explore R2P solutions and act now?
Both fintechs and traditional payment service providers (e.g., global card providers) are seeking first-mover advantage to gain a greater market share. For instance, Mastercard launched its R2P solution in 2021 in the UK, and recently partnered with Temenos to accelerate its adoption. Some merchant players (e.g., Amazon and Alipay), social media platforms (e.g., WeChat) have also integrated this feature in their respective platforms. Swedish Fintech Klarna set up a business model for small purchase lending through a BNPL solution and Apple added a R2P feature to Apple Pay in April 2022. In Switzerland eBill adoption has significant potential for expansion (see the Figure below) and can offer further opportunities for monetising.
Swiss banks should look holistically at payments solutions for merchants and consider adding R2P to their existing banking applications for retail clients. Merchants, corporates, and e-commerce market players should also reassess their payments strategy and offer a greater variety of options.
- Previous Deloitte Finance Day 2023 - The colours of finance - design your future capability - 1 June 2023 in Zurich
- Next Is the banking sector ready for tax technology?