By Francis De Roeck, Global Cash Management, Payment Regulations, BNP Paribas
What for you are the benefits of attending a conference like the ‘Payments Europe Summit’ and what have attendees learnt from your session?
A payment is never a stand-alone transaction triggering some payment instrument, but is a delicate interaction between a lot of stakeholders in a multi-dimensional ecosystem of finance, technology, regulations, behavioural aspects, etc… One of the biggest advantages of attending a conference like this is the possibility to meet at the same time knowledge experts and discuss in-depth some concepts as meeting key influencers allowing to challenge some more strategic trends.
For BNP Paribas Cash Management I do follow up the newest regulations related to payments. Related to Instant Payments and the newest EPC Request to Pay scheme I’m member of the EPC Scheme Board, the EBA Clearing R2P Workgroup as of the ERPB-R2P Multi-stakeholder WG. This allows me to have a good view on the newest developments on Request to Pay. BNP Paribas is also a sponsor bank of the R2P platform under development by EBA Clearing.
Finally, during my presentation guided the attendees through this new EPC 4-corner Request to Pay initiative, allowing to better understand the wide possibilities but also the challenges and the possible impacts on other payment solutions.
How can risk professionals review opportunities with request to pay as a payment concept to enhance customer experience?
Request to Pay is a term that is already used in different situations and may cover many different implementations. Today Request to Pay is for example often mentioned in the context of a services used to get payments initiated by Third Parties via Open Banking. Sometimes customer need first to enrol, and anyway, each Open Banking solution triggers a new or a different customer experience. The R2P scheme that the EPC is developing –and that will be highlighted hereafter- will be different. It will become a full 4-corner model, so that the client/payer will always be contacted by his bank, via his well-known application, be it for a P2P payment, be it for an e-payment, be it for an in-shop payment, be it abroad or be it at home. One single universal customer experience, to be compared to different Open Banking experiences.
Customer experience is indeed key and can promote or can even kill a payment solution. What will become the preference: one universal customer experience (EPC-R2P scheme) or many different -and perhaps situationally well driven- customer experiences (API -Open Banking)?… That the best may win!
Why are changes to the card payment industry and merchant costs a key focus?
When it comes to the EPC-Request to Pay scheme, the offering is very similar to cards. Both are in fact an authorisation system triggered by the payee that allows him to have a view (or even a certainty) on the real payment capacity and intent of the payer. Maybe R2P can cover a broader spectrum of use cases with “approve now/approve later” in combination, with “pay now/pay later”? But this broader range need than perhaps to be compared to the world-wide acceptance of cards, whereas R2P starts for the moment only on a European dimension. In principle R2P is payment instrument agnostic, underlying it can either be a classic credit transfer, either be an instant payment. In the cards world, new initiatives such as “Instant card payments” are popping up, so again, the finality of both products comes close together.
Cards can get lost, can be stolen and need to be renewed, even if some cards are already virtual. This exception handling process of cards has a huge operational cost that card schemes push to the banks and so indirectly to their users and the merchants. R2P is being conceived for the moment within a much lighter operational process. Even though there is not yet a governance scheme designed on top of the EPC-R2P scheme it may perhaps be ‘lighter’ than the existing card schemes. Which –if confirmed- will inevitably percolate towards the merchants.
What are and how can we respond to the challenges of regulatory change and the new payments architectures?
Open Banking allows to create a Request to Pay offer triggered by APIs’ for the initiation of payments. This was clearly the result of the PSD2 regulation. Initiatives are popping up, but certainly not as “massive” as could be expected initially. Beside the ERPB (European Retail Payments Board – the Commission, the ECB) requested the EPC (European Payments Council) to create a Multi-Stakeholders Work Group to analyse and propose a Request to Pay solution. Based on the results the EPC will build now a R2P-4 corner scheme. R2P is thus not (yet?) the result of a regulation but a market practice however with a strong push from the authorities.
Credit Institutions and PSP have nowadays performant payment instruments but had up to now no offer to trigger them. Open Banking is offered (for free) to Third Parties. Beside OB there are also large closed loop e-money/wallet payment systems but with no interaction to banking account (except for feeding the wallet). With a Request to Pay (EPC 4-corner) offer Credit Institutions are finally able to bring back the offer in house, or either to collaborate actively in the full E2E-payment flow.
Of course, R2P will request new sets of messages, new schemes, new payment architectures and finally also… new investments to be done.
What approaches do you see being taken in the future for connecting all banks to a solution?
It is difficult to predict the future, and indeed a good 4-corner R2P scheme can only fly if there is enough reachability. At the EPC we see already a great appetite of the members to participate in the different workgroups around the R2P subject.
As important is the interest from the different clearing houses to build -and offer- a R2P message exchange platform. The EBA Clearing initiative can be mentioned as the first initiative with already 26 large European banks having signed-up for building an R2P interbank platform. This clearly can’t predict success yet but shows the wide interest of the banking community in the R2P solution.