We are heading into the height of industry conference season. One of my favorites is the Association for Financial Professionals’ annual conference. This year’s event, AFP2024, will take place in Nashville from October 20-23, and I’m honored to be moderating a panel on Request for Payment alongside colleagues from Netflix, US Bank, and The Clearing House.
Our panel will explore the market potential of Request for Payment (RfP), a concept rapidly gaining attention as an innovation that could improve consumer and business payment experiences. It could become the fuel for use cases to generate additional traction for instant payments enabled by The Clearing House (RTP) and the Federal Reserve (FedNow).
A Different Kind of RFP
The business acronym RFP has been used for many years. Only among payments insiders is it abbreviated as “RfP” and refers to a non-financial message sent over instant payment rails that allows a payee to request funds from a payor (customer) through their respective financial institutions. When combined with instant payments, RfPs offer unique benefits over current money movement methods.
RfP is driving several logical use cases:
- Account-to-account transfers have been the most significant driver of early volume, with consumers using instant payment RfPs to fund brokerage accounts and digital wallets instantly. Leading banks on the RTP Network have been particularly active in this area, funding investment accounts and giving consumers real-time access to those funds by enabling real-time transfers back to transaction accounts.
- Recurring bill payments are another natural fit by settling periodic activity with greater control and precision than a standing auto debit can offer. It’s easy to see why leading merchants have been actively exploring such opportunities, and organizations like the US Faster Payments Council have a workgroup dedicated to this opportunity.
- Another area gaining interest is B2B payments for business invoicing. RfP, in tandem with real-time payment capabilities, promises an enhanced overall commerce experience for both parties involved in the transaction. Payors gain greater control over the timing and amount of outbound payments, eliminating concerns over lag times and auto debits for unexpected amounts. For their part, payees benefit from immediate access to guaranteed funds as well as the back-office efficiency of straight-through processing and a clear flow of transaction data. SRM will be sponsoring a workgroup at the US Faster Payments Council to explore the potential of this topic in detail.
- And potentially most impactful long term is instant payments pay-by-bank. As payments become more firmly embedded in the overall shopping experience, merchants are increasingly motivated to pursue any operational advantages. This dynamic drives interest in pay-by-bank solutions, which offer shoppers greater payment choices while promising lower payment acceptance costs. The model remains in its nascent stages, but announcements of a Fiserv/Walmart partnership and a new Plaid product offering speak volumes about the growing interest in the model.
The Bottom Line
For those attending AFP2024, I encourage you to watch our Request for Payments panel on Tuesday morning, October 22, where experts will discuss the points raised here and other RfP-related topics. And please look me up and say hello. If you won’t be in Nashville, the RfP topic is advancing rapidly and demands the attention of professionals across payments, corporate treasury, and financial services. Our recent special report on instant payments covers this emerging method in more detail.