Rethinking payment methods for an “anytime, anywhere” world

By Richard Ransom, Payments Solution Lead, Bottomline Technologies

In an era where everyone and everything is going mobile and technology has given rise to ‘anytime, anywhere’ cultures, financial services particularly rigid recurrent payment structures must adapt to this new scenario.

The digital transformation of the workplace, which has enabled a flexible workforce and a gig economy that employs 5+ million (according to research conducted by the University of Hertfordshire) with a pay structure that is anything but consistent, has become key for companies to help drive growth.

The rapid development and extension of digital platforms and digital payments has made it possible for more financially inclusive payment methods that can provide the speed, security, transparency and agility needed to increase financial efficiency within businesses. But how do you make that happen?

Ending traditional payment paradigms by increasing control and flexibility

Enter Request for Payment (RfP), a new payment instrument being proposed by the UK Faster Payments Scheme in the UK, which is scheduled for release in the next couple of years.

This solution will give customers more control and flexibility over the timing of their outgoing payments to fit with their money management needs by allowing billers to send individual requests for payment directly to their customers, including payments made via their mobile device. The customer would then have the option to make the payment, defer it to a more convenient time, choose a part payment or enter into a dialogue with the biller. RfP would supplement existing payment methods, including the staple method of Direct Debit.

But RfP is not only about helping customers manage their bill payments and cash flow more effectively; it also represents a tremendous opportunity for the UK economy. This new payment instrument is an option that’s thoroughly up-ending traditional payment paradigms for the business world. In 2015 the total volume of Person-to-Business regular payments was 4.9 billion. Accenture estimates that 1 billion of these payments could be replaced by RfP, with an annual economic benefit of £1.3 billion.

But despite RfP being presented as the engine to rethink payment solutions and adapt them to the ‘anywhere, anytime’ world we live in, it’s understandable that the thought of customers being able to pay a given bill whenever it’s convenient for them may be met with a dose of resistance and a touch of panic. Traditional invoices with a pre-set due date are successful because they ensure predictable cash flow, right?

Well… you’d think so, but that’s not entirely true. Traditional invoice methods with a 30-45 day payment term are often ignored until due date is reached or invoices are chased.  Inevitably there is a working capital implication that sets in when there’s a reduced certainty of when cash will flow.

Set due dates really only work for people who have a predictable inflow of cash and can therefore budget for recurring expenditures effectively. If the money isn’t available, then a payment just isn’t possible, triggering unexpected bank fees, exceptions processing and a poor overall customer and biller experience. For the growing number of the population that experience ongoing fluctuations in their cash flow, set due dates are nothing more than a burden preventing payment.

Yes, traditional due dates feel as though they provide a comfortable level of structure over the payment process, but all they really do is pose a host of constraints for people who legitimately want to pay their bills but just need some additional flexibility to do so.

And let’s not forget the customer service benefits that can be achieved by providing customers with greater flexibility. By eliminating the prescriptive approach to bill collection, RfP fosters a friendlier, partnership-focused relationship between organizations and customers that is always better for business in the long run.

Organisations should be encouraged that RfP is becoming a reality, because it offers a number of significant cash management benefits that aren’t available with other payment methods:

  • Potentially better cash flow as instances of default decrease due to greater flexibility for payers
  • Efficiency increases and cost savings of not having to chase late payments and cover bank fees
  • Decrease in cost to process each payment compared to the invoice-to-pay process – by as much as 8% (Economics of Request for Payment, Accenture)
  • Ability to use the RfP mechanism to pay vendor bills when it’s suitable as a means of optimizing working capital

There is still some work to do to make RfP a widely adopted reality, as well as a number of more detailed questions around consumer education and development and launch approaches as part of the Payment Strategy Forum’s plan for the UK. One thing, however, is very clear – giving customers more flexibility and control over how and when they pay their bills is the only logical step in this constantly evolving ‘anytime, anywhere’ world we live in.

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