The Request for Payment (RfP) is a payment processing system that has been agreed by financial institutions globally to be the future of digital payments. RfPs enable businesses and consumers to get paid into their bank accounts from customers’ accounts in real-time within seconds. Vendors no longer need to wait two to three days for payments to clear – they instantly flow into their accounts before customers take possession of a product.
What is a Request for Payment?
RfPs tie together real-world and digital transactions by enabling payments to be used for commercial transactions in one ecosystem. While the technology is being unfurled and adopted across financial systems it must still overcome some technological challenges that frustrate the mass adoption, integration, and promulgation of a new disruptive payment processing system.
Customers do not need to register with a financial services provider (e.g., MasterCard, Visa, PayPal, crypto wallet). They can simply download the app and connect it to their bank account. Businesses are rapidly adopting it because they no longer need to wait for payments and have access to a wider range of customers, even those who don’t have credit cards or debit cards. This significantly larger audience means more revenue and profits for businesses that use it.
Benefits of RfPs
Customers are likely to prefer RfPs because it reduces their transaction costs and reduces financial fraud, results in fewer chargebacks, and provides them with better information about their commercial transactions. All of this is the result of customers being required to sign in to their bank accounts and to approve the transaction using two different types of transaction authentication. Moreover, customers aren’t required to have a mobile phone. They can access RfPs using their email accounts.
Businesses are wholeheartedly embracing RfPs because it makes it easier for them to register revenues and profits. Instead of waiting for days to receive their payments, they get them immediately which helps them to fund their operations and decrease the interest and fees that they are required to pay for financing plans (e.g., 30-, 60-, 90-day plans). Other benefits include lower fees paid to third-party payment processors, easier ledger management, and currently much fewer regulations to comply with and follow.
The additional benefit is that it can be used in B2B payments for goods and services. RfPs allow businesses to go outside of the traditional banking and financing system to execute financial transactions. A major benefit of going outside of the established financial system is that businesses can use the blockchain, non-banking entities, and even traditional finance to fund their operations and process payments. The increase in payment options translates into greater financial flexibility, greater access to revenue, and more financing options. All of that with much less government oversight and policing from financial regulatory authorities. The plus side of less regulation and oversight is that businesses spend less money and time complying with the bureaucratic red tape that must be managed in order for businesses to engage in legitimate operations.
“As the infrastructure provider for several RTGS systems and the New Payments Platform (NPP) in Australia, SWIFT has firsthand experience in developing new real time payment systems. ISO 20022 and APIs are core technologies, creating the foundation for value added services like RTP.”
– Stephen Lindsay, Head of Standards, SWIFT
The RfP’s path to ubiquity
In order for the RfP to be widely adopted, it must become the preferred payment system for the majority of merchants, marketplaces, fintechs, banks, crypto wallets, financial institutions, and governments. Citi, JP Morgan, and other leading financial institutions are working with a wide array of private and public organizations to help coordinate their businesses activities, marketing strategies, and adoption of payment processing technology. RfPs require wide-scale collaboration and strategically planned business activities that will facilitate the development, implementation, and use of the system by actors within the RfP ecosystem.
Next month, I will delve more into the parties involved in RfPs, challenges with adoption, and suggestions for innovation. For more thoughts on global commerce trends, continue following my column here and my other writings on Coruzant Technologies.
Bio: Dr. Angela Murphy has experience in artificial intelligence, financial technology, and the global payments industry, building on her skills as a storyteller and rhetorician. She engages at the intersection of strategy and insight to drive results for her clients. In her current role at Photon Commerce, she helps run a team that uses artificial intelligence and machine learning to solve complex problems in the payments industry. Dr. Murphy received her Ph.D. from the University of Kansas, and currently resides in Kansas City with her husband, Brock, and German Shepherd rescue, Roscoe.
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Angela Murphy, Ph.D.
Vice President, Business Development, Photon Commerce
Dr. Angela Murphy has experience in artificial intelligence, financial technology, and the global payments industry, building on her skills as a storyteller and rhetorician. She engages at the intersection of strategy and insight to drive results for her clients. In her current role at Photon Commerce, she helps run a team that uses artificial intelligence and machine learning to solve complex problems in the payments industry. Dr. Murphy received her Ph.D. from the University of Kansas, and currently resides in Kansas City with her husband, Brock, and German Shepherd rescue, Roscoe.