“Last millennium, we had the options of paying by debit or with credit card, cheque or cash, and by recurring card payment (continuous payment authority or CPAs), standing order or Direct Debit for regular payments.”
“Today all those options remain, plus a myriad of other options including PayPal, Apple Pay, Google Pay, Klarna and even Bitcoin to name just a few. Payment wallets abound as we move inexorably from cards to digital devices.”
“Whilst Direct Debits and standing orders have been around since Paul McCartney left the Beatles and before, there will soon be another alternative way to pay for regular bills.”
What exactly are Variable Recurring Payments?
“Variable Recurring Payments (VRPs) are part of the Open Banking revolution and SmarterPay are taking a really proactive approach to this ever-changing landscape and understanding and adapting as a Company to finance team’s demands in this developing area.”
“There are two types of VRPs – sweeping and commercial. Sweeping allows you to ‘sweep’ a balance in one account into another account e.g. from a current account to a savings account, and the roll out in the UK is well underway.”
“Commercial VRPs – a planned alternative to recurring card payments or Direct Debits – are currently in their infancy, but many industry commentators see them as a viable option for bills such as subscriptions and utility payments for some groups of customers.”
So, what is a commercial VRP?
“It’s a flexible way to make regular payments. A customer authorises the company they are paying to take regular payments from their bank account in accordance with certain limits, such as the maximum value for each payment. The customer can also change the amount and date for each recurring payment, depending on what rules and parameters they and the business agree to”.
“This gives the customer control and flexibility over the timing of when bills and regular payments are taken, and the size of those payments, whilst avoiding the need to enter bank account details or complete paperwork when making a payment.”
“Whilst there’s no generally accepted consumer safeguard currently agreed, the customer can also cancel the recurring payments at any time. VRPs would likely be managed using a banking app or using another type of secure app or payment wallet such as Apple Pay, with no additional charges to the customer.”
Recurring payments at a glance
| Direct Debit | CPA | VRP | |
| Transparency | You have visibility of the mandate and the last amount taken. | You can’t see details, only the transactions that appear on your statement. | Mandate and payment parameters are visible in your banking app. The payment parameters limit the amount that can be taken and allow an end date for the mandate to be set. |
| Security | Involves sharing a sort code and account number in an uncontrolled environment. | Involves sharing all card details on a debit or credit card. | Must set up via a secure consent journey. It has to be online and through your bank. |
| Flexibility | Takes place on the same day (or nearest working day) every month and if the timing or amount changes, the payee has to be notified in writing (unless waived in terms and conditions). | A company is given permission to take funds from your debit or credit card on a flexible basis. | A set of parameters is agreed and a flexible payment can be made within those agreed boundaries. |
| Control | Have to contact payee or bank to cancelor amend. Generally needs at least one days notice before payment is due to go out. | Have to contact payee / bank or credit card company to cancel or amend. Generally needs at least one days’ notice before payment is due to go out. | Can be cancelled or amended online right up to the point of irrevocable payment. |
| Consumer protection | Direct Debit Guarantee gives a full and immediate refund in the event of an error being made. It promises advance notice of any changes and includes the right to cancel. | Section 75 of the Consumer Credit Act gives the right to claim costs back between £100 and £30,000 from your card provider. Debit cards offer lesser protection via chargeback for purchases under £100. | There is currently no consumer protection agreed although VRPs can be cancelled at any time. |
Source https://www.openbanking.org.uk/insights/variable-recurring-payments-what-are-they-and-how-can-they-help-smes/
Source https://www.openbanking.org.uk/variable-recurring-payments-vrps/
So when will commercial VRPs be rolled out and available to billers?
“The Payment Systems Regulator (PSR) issued a call for views in December 2023 setting out their initial proposals for roll out. In August 2024 it published the non-confidential responses it received and aims to share updated proposals in the Autumn.”
“Here at SmarterPay, we are a member of the Open Banking network and are staying up to date on the development of VRPs. We are committed to offering our customers a wide range of payment options that best suit their business and will be at the forefront of the VRP roll out.
If you are looking for a better understanding of VRPs and would like further information, please contact sales@smarterpay.com or call the team on 01482 240886