By Lou Grilli
Real-time payments are just that – the authorization, settlement and movement of funds from the sender’s account to the recipient’s account within seconds, or in real time. Real-time payments enable payroll to be available in an employee’s account immediately at the end of a shift or for funds from an insurance disbursement to be spent within seconds after it is approved, for example.
While real-time payments are most known for the immediate availability of funds, another unique feature – and one that is gaining attention – is Request for Payment (RfP). Similar to bill presentment in the bill pay segment, RfP gives credit unions the ability to securely present a bill through online banking portals in real time for both consumer billing (B2C) and within business-to-business (B2B) billing and payment.
Payees can see and immediately pay bills in their real-time payment portal and/or bill pay app, as well as schedule the payment at a later date. Billers, in turn, are notified their bill has been received by the customer, and when paid, can match the bill to the payment immediately upon receipt.
How Does RfP Work?
RfP is a message sent over the same secure payment rails using the same data-rich message set as the payments themselves. It contains the information needed by the consumer to understand the bill, as well as the information the biller needs to associate the payment with the consumer’s account. When the consumer receives the RfP and then responds by sending the payment from a secure, real-time payments portal, the “send payment” message automatically contains all the information the biller needs to apply the funds instantly and accurately.
Why RfP?
Paying bills via the biller’s website (“biller direct”) is currently the channel of choice for most consumers when making payments. Seventy-six percent of bills were paid via this channel in 2020, up 14% since 2010, according to an Aite report. While this method is convenient, it does present some challenges.
Utility, medical, insurance and mobile phone service bills – and others – are sent either by postal service or (most commonly) via email. Payments are made through a financial institution’s bill pay or directly on the biller’s website. This means the request for payment (the bill) and the actual payment are “out-of-band” from each other as the information contained in the bill is not automatically transferred to or associated with the payment.
The Result
The result is a significant number of bill payment “exceptions,” defined as situations in which the biller receives funds, but cannot post the credit to the consumer’s account. According to a NACHA study, there were an estimated 130 million bill payment exceptions in a single year, costing the industry $720 million. The study found that 98% of all ACH bill payment exceptions were due to incorrect or missing consumer account information.
RfP greatly reduces the number of exceptions and closes the gap between consumer expectations for payments to be processed immediately and bill processing turnaround time, while moving the payment from email and web back to the financial institution’s digital experience. The whole process, from bill presentment to payment and confirmation, is simplified through real-time payments messaging.
Payees benefit from RfP by being able to pay their bills immediately, which can help them to avoid late fees, fines and disruption of services, while also getting assurance their payment has been applied correctly, and more control over when bills are paid, which helps manage cash flow. Billers, on the other hand, get cost savings and the greater potential for automation of customer payment processing.
All the benefits to credit unions of a traditional bill pay solution still apply when it comes to offering RfP capabilities within real-time payments: it creates stickiness, provides the convenience of online payment and keeps the member’s payment experience branded to the financial institution.
New Revenue Opportunity
Credit unions get a new revenue opportunity and a modern rail to replace existing bill pay, all while keeping members on their website or in their app. RfP also comes with the additional benefits of real-time payments and immediate posting to the account, while eliminating a major source of exceptions.
RfP can deliver on the promise of a better payment experience and financial outcome for credit union members, businesses and credit unions – a true win-win-win for the financial services industry.
Lou Grilli is a Senior Innovation Strategist at PSCU. In this role, Lou is tasked with building and shaping a superior payment and member experience capability for PSCU and its Owner credit unions. Lou’s long career in payments includes product management, product development and thought leadership in credit, debit, loyalty, mobile payments and digital wallets. Lou has spent the last six years in roles dedicated to the credit union industry.