Introduction
The UK’s open banking ecosystem is progressing steadily, with over 22.1 million open banking payments made monthly and a user base exceeding 11.7 million. This evolution is supported by collaborative efforts from the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR), which are aligned with the National Payments Vision and the government’s growth agenda. Significant advancements include developing variable recurring payments (VRPs) that enhance consumer control over regular payments while reducing unexpected expenditures. VRPs also present businesses with competitive alternatives to traditional payment methods, potentially lowering processing fees and improving payment completion rates.
Key stakeholders, including Open Banking Limited (OBL) and private sector firms, are gearing up for the establishment of an independent central operator for VRPs. These efforts aim to make live recurring payment services accessible for utilities, government, and financial services by 2025, setting the stage for future innovations.
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Industry Comments
Commenting on last week’s letter and the new announcement, Tom Burton, external affairs and public policy at GoCardless, the paytech, said: “Last week, the FCA wrote to the Prime Minister and Chancellor to say that, ‘certainty and predictability underpin business and investor confidence’.
“Today’s statement is welcome clarity that an independent central operator for VRPs will be created. We need the regulators and industry to pull in the same direction now and work out how this will be done successfully with a view to launching VRPs as early as possible this year.”
Charles Damen, chief product officer at Token.io, commented on the focus on VRPs saying: “It is clear from the UK’s National Payments Vision that continued success in account-to-account (A2A) payments and the development of VRP are critical for driving the UK’s digital innovation and economic growth agenda.
“VRP is a breakthrough providing consumers and businesses with an innovative and long-awaited alternative for seamless, flexible and competitive e-commerce payments, underpinned by a sustainable commercial model for banks.”
Nicole Green, VP API product strategy, innovation and policy, Yapily also added: “We are pleased the FCA and PSR have come to a decision on who will drive forward the development of the cVRP MLA Operator. We look forward to working with OBL, UK Finance and the wider ecosystem to shape the Operator over the coming months. Progress in this regard is crucial, along with the development of the commercial model and decision on bank participation, to launching Wave 1 use cases later this year.
“Ultimately, it is key to get going so that we can make crucial learnings that will enable us to progress to e-commerce use cases in 2026.”
FAQ
1. What are Variable Recurring Payments (VRPs), and why are they significant?
VRPs are a key innovation in open banking that allow consumers to set limits on recurring payments, offering greater control over expenditures and reducing the risk of unexpected costs. For businesses, VRPs provide an efficient alternative to traditional payment methods, potentially lowering transaction fees and improving user experience.
2. How will VRPs impact the UK’s financial landscape?
VRPs are expected to drive digital innovation and economic growth in the UK by enhancing consumer payment options, improving e-commerce experiences, and fostering competition. The FCA-endorsed creation of an independent central operator will ensure VRPs are effectively implemented for utilities, government, and financial services.
Conclusion
The FCA and PSR’s commitment to advancing open banking through VRPs underscores the UK’s leadership in financial innovation. With the establishment of an independent central operator for VRPs, the foundation is laid for seamless, consumer-controlled recurring payments. This breakthrough not only benefits consumers by enhancing flexibility and reducing unexpected costs but also provides businesses with cost-effective and user-friendly payment solutions. Key industry players like Open Banking Limited, Token.io, and Yapily are actively collaborating to shape the future of VRPs, with plans to implement Wave 1 use cases by 2025.
The ongoing development of VRPs is vital to achieving the National Payments Vision, driving the UK’s digital economy, and preparing for broader applications, including e-commerce, in 2026. This initiative signals a transformative era in open banking, setting a global benchmark for innovation and inclusivity.
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