SEPA Request-to-Pay (SRTP) is a new scheme by the European Payment Council, similar to SEPA Credit Transfer (SCT), but it is neither a payment instrument nor a payment system, but rather a messaging service. What’s the point of this? This is what the following blog article will deal with.
The European Payment Council, which is also overseeing the other SEPA schemes, has created a new scheme and submitted it for consultation. It is called SEPA Request-to-Pay, abbreviated SRTP, and is designed to make it easier for payees to send payment requests to payers, to automatically allocate incoming payments and, if necessary, even to agree electronically on partial and instalment payments. SEPA Request-to-Pay is a bit like an Uber-e-biling tool, to which in an ideal world everyone would connect to.
How SEPA Request-to-Pay works in detail:
The SEPA Request-to-Pay scheme is a four-party system in which the payee, its SRTP provider, the payer and the payer’s SRTP provider participate.
The payee (e.g. an online merchant) can use the data entered by the buyer (= payer), such as the buyer’s name, IBAN, price and item, to create a “Request-to-Pay”, i.e. a payment request in a format defined by the SRTP rulebook. The merchant is supported by its SRTP provider, who converts the merchant’s data into the appropriate format and sends it to the buyer’s SRTP provider.
The buyer then receives the “Request-to-Pay” on its device within a few seconds. How the buyer is shown the merchant’s payment request, e.g. by e-mail, push message on a mobile phone or by WhatsApp message, is a matter of security and agreement between the buyer and its SRTP provider. The SRTP scheme rules do not specify how communication with the buyer works and over which channel the buyer receives the messages.
The buyer then has the choice to accept or reject the Request-to-Pay. In the future, requests for partial payments or payments by instalments will also be possible, but these are not yet included in the current version of the rulebook. The merchant can also make a proposal on how the buyer should pay, e.g. by SEPA Credit Transfer (SCT) or by SEPA Instant Credit Transfer (SCTInst).
If the buyer refuses to pay, the merchant will receive an immediate rejection message. If the buyer accepts the payment request, the payment can be triggered by the buyer, e.g. by a SEPA transfer in online banking, without the buyer having to enter the amount, the merchant’s account details and any invoice number. However, the payment itself is outside the scope of the SRTP scheme but is ideally connected with it.
How can payment be made then?
In principle, the SRTP scheme does not specify a payment method. The buyer is therefore free to choose how to pay the agreed amount. However, the SRTP rulebook in the consultation version explicitly assumes that the payment will be made by SEPA credit transfer after the Request-to-Pay.
Request-to-Pay becomes really interesting and thus also capable of point of sale transactions, if it is combined with a SEPA Instant Credit Transfer, because then the purchase price would be on the merchant’s account within seconds.
However, the SRTP rulebook only provides for the payee to receive a message that the payer accepts the Request-to-Pay. Whether the payer then actually pays, i.e. initiates a transfer, is not part of the SRTP scheme.
Who can become an SRTP provider?
As it is a messaging service and not a payment service, any company can become an SRTP provider if it provides the technical infrastructure and agrees to adhere to the SRTP scheme rules. Yet, SEPA Request-to-Pay will only be of real benefit if the payer can pay immediately after receiving the Request-to-Pay. This requires integration with the payer’s payment service provider. In fact, the banks are therefore in pole position to offer the service as an ancillary service to their online banking. However, becoming an SRTP provider can also be an attractive option for payment initiation services.
Who is SEPA Request-to-Pay interesting for?
Based on the current version of the SRTP rulebook, Request-to-Pay should initially become interesting in the B2B sector. Companies could use it to send payment requests to their business customers that include a payment term (this functionality is included in the SRTP format) and quickly obtain certainty about the willingness of their customers to pay if the request is accepted. However, since tax law requires further data for an invoice and prescribes durable format, this will require further development work and possibly a change in the law until SRTP represents a complete electronic invoice.
For the account servicing banks, SRTP means the possibility of offering their customers an online payment option that works throughout the SEPA area and which could be very convenient, because it is no longer necessary to enter IBAN, amount and reference, but only (strong) authentication. It will be essential, however, that the implementation is truly user-friendly and also available on mobile. Unfortunately, this is still a weakness of the banks. As mentioned above, SRTP will be of particular interest (and comparable to the usability of a credit card) if it is combined with an instant credit transfer. Thus, there is also a great opportunity for banks to promote the use of SEPA Instant. However, the prices to use SCTInst must be lower, otherwise consumers will switch to other payment methods that do not cost them anything.
PSPs that cater to the needs of (online) merchants will want to offer SRTP if the merchants ask for it. And here comes a crucial question: Why would the merchant want to use SRTP? It is certainly attractive to attract customers who do not have a credit card but a current account. However, as long as it is not clear how to ensure that the customer actually pays, or how the merchant can see that payment has been made (preferably in real time), SRTP does not offer any advantage to the merchant over payment initiation services such as Sofort.
Conclusion: In combination with a truly pan-European open banking, a really good user experience on the payer side and the possibility of using SEPA Instant at low cost, SEPA Request-to-Pay has a very interesting scope of application and could very easily be developed into a European payment system. Then again, these are some requirements that do not sound like they would be implemented quickly.
The next steps
In November 2020, the new version of the SRTP Rulebook is due to be published by the EPC. The Scheme is then expected to start as early as early 2021.
Current status of the SRTP Rulebook: https://www.europeanpaymentscouncil.eu/document-library/rulebooks/public-consultation-sepa-request-pay-scheme-rulebook
If you want to read up on how payment with the SEPA direct debit works, we recommend the article (German) by Matthäus.
Cover picture: Copyright © Adobe Stock / Mymemo