Draft:Variable Recurring Payments (VRP)
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Variable Recurring Payments (VRPs) are a type of automated payment arrangement that allows a third-party provider to initiate payments from a consumer’s bank account on a recurring basis, with variable amounts and at variable intervals. VRPs are enabled through open banking APIs and are designed to offer a secure and consent-based alternative to traditional methods such as direct debit or card-on-file transactions.[1].
Unlike standard recurring payments, which are typically fixed in value and frequency, VRPs provide users with more flexibility and control. The customer grants a one-time, upfront consent to a third-party provider (TPP) to initiate payments within agreed parameters, such as maximum amount, duration, and purpose.
VRPs were introduced in the United Kingdom under the Open Banking Implementation Entity (OBIE) framework[2] and initially limited to sweeping - moving funds between accounts held by the same individual. Future extensions are expected to support wider use cases, including subscriptions and usage-based billing.
Key Features
[edit]- User consent: Customers must approve the use of VRPs and set the parameters under which they operate.
- Variable amounts: Payments can vary in value within limits specified by the user.
- Flexible frequency: Payment frequency is not fixed and can change depending on the service.
- Revocable access: Users can revoke consent at any time via their bank or provider interface.
Use Cases
[edit]- Transferring excess funds between personal savings and current accounts (sweeping)
- Subscription services with variable usage fees (e.g., utilities, digital services)
- Pay-as-you-go insurance or transport services
- Real-time invoice settlement in business banking
Implementation and Adoption
[edit]In the UK, VRPs were made available through the open banking ecosystem starting in 2022, with banks required to support VRPs for sweeping. Wider commercial VRPs remain optional and are subject to bilateral agreements between banks and TPPs.
Industry groups and regulators, such as the UK Competition and Markets Authority (CMA) and Open Banking Limited, continue to promote broader adoption of VRPs as a key evolution in payment initiation services[3]
Comparison with Direct Debits
[edit]| Feature | Direct Debit | Variable Recurring Payment |
|---|---|---|
| Initiated by | Merchant | Third-party provider (TPP) |
| User consent method | Mandate (paper/electronic) | API-based digital consent |
| Payment variability | Limited (usually fixed) | Fully variable (within limits) |
| Revocability | Requires bank or merchant action | Instant via user interface |
| Real-time execution | No | Yes (in most cases) |
See also
[edit]References
[edit]- ^ https://www.openbanking.org.uk/variable-recurring-payments-vrps/
- ^ https://www.openbanking.org.uk/news/the-obie-publishes-the-latest-open-banking-standard-to-enable-variable-recurring-payments/
- ^ https://assets.publishing.service.gov.uk/media/622ef71fd3bf7f5a86be8fa4/Sweeping_clarification_letter_to_be_sent_14_March_2022__.pdf