Thought Leadership

Looking ahead to the future of commercial variable recurring payments 

25 November 2024

As 2024 draws to a close, it’s an ideal time to take stock of the current status of commercial variable recurring payments (cVRPs) and look ahead to what we are anticipating for 2025. 

The logical expansion of variable recurring payments for sweeping (VRPs) or me-to-me payments (moving money from your current account to your savings account, for example) and retail account-to-account (A2A) payments are cVRPs. These promise to deliver greater control over payments for consumers and businesses and, over time, to deliver different retail A2A products and services.  

Importantly, cVRPs include the ability for consumers to limit the value of any payment from their account, particularly for bills or subscription payments. This can be either the amount per payment, or the total value of all payments over a pre-defined period (a monthly, or yearly cap, for example), offering a flexible alternative to Direct Debits, Card Continuous Payment Authority (CPA) payments, and Card on File payments. 

OBL, Pay.UK, UK banks and fintechs are all collaborating to deliver this innovative new type of payment, with the involvement of regulators too. The publication of the National Payments Vision also demonstrated that the Government has a clear agenda for the future of payments and open banking.     

Nick Davey, OBL Head of Strategy

As the UK payments landscape expands to offer more choice about how customers pay, and how merchants receive payments, we summarise key milestones, for this year and next. 

How premium APIs have become cVRPs 

Premium APIs were always a key next step in the evolution of open banking, leading to a significant change in the products and services that third party providers (TPPs) could offer businesses and consumers. The key difference is that they would operate on a commercial footing that would incentivise ASPSPs to develop, enhance and maintain the APIs, and the services behind them.   

However, the industry has yet to deliver any widespread products or services, and it is clear that the conditions for development haven’t yet been met. A successful market in premium APIs needs the following to be useful to consumers and businesses: 

  • near-ubiquity for any product or service 
  • a network of TPPs and ASPSPs  
  • a central agreement, operational rules, and an operator 
  • the ability to scale. 

It is possible to claim that cVRPs are effectively the first open banking premium API that is being centrally developed in the UK. 

However, for cVRPs to provide an effective service to billers and customers there needs to be a robust proposition: What is it? How does it work? What are the benefits to customers? And what protections are there if things go wrong? So, the proposition needs to evolve to offer additional use cases. We have been working on these elements since July and hope to publish the details of a cVRP proposition shortly.   

Bilateral and multilateral agreements  

When OBL and Pay.UK started to develop cVRPs, we weren’t starting from scratch. In 2023, the VRP Working Group published a VRP blueprint which detailed the necessary requirements to get a cVRP product off the ground.   

In parallel, a UK Finance group of ASPSPs and PISPs examined how legal clauses – model clauses -could underpin bilateral contracts in this space.  

These were a great foundation to build upon, and it was agreed that for cVRPs to be a multilateral product, a large number of PISPs and ASPSPs needed to agree to: 

  • relevant standards 
  • key aspects of the proposition, such as the messages provided to consumers 
  • day-to-day operational requirements.  

In other words, participants need rules to follow to ensure that there are consistent consumer and biller/merchant journeys, and that there is a clear contractual basis for participants to interact with each other.  

To support this, OBL and Pay.UK have been discussing the policies and requirements that underpin that rulebook with the industry, and relevant regulators. We are currently in the process of creating the rulebook, alongside the associated contract and supporting documents. While we are on the way to delivering the ‘system’ that will underpin cVRPs, there is still a little way to go.  

A commercial system means there will be associated costs and fees, and these still need to be finalised and agreed. There are also likely to be additional requirements revealed as part of the ‘test and learn’ approach recommended in the blueprint.   

For that reason, we have defined a limited set of initial use cases for Wave 1, which will be ‘live’ products and services for regulated industries which already offer strong consumer protection, and where there are experienced billers. These are being finalised, but will include: 

  • regulated utilities 
  • central government agencies, and local government 
  • FCSC-protected financial services (not already covered by sweeping) 
  • charitable donations. 

Next steps 

We aim to finalise the rulebook in Q1 2025, after a period of public consultation. That will also require the development and implementation of a commercial model.   

We are also considering the different MLA models, how they would be operated and by who, aiming for a period where prospective participants can work to being technically and legally able to sign up to the rules.   

We anticipate that industry will be ready from mid-2025, when participants are able to be part of the MLA, and build and offer cVRPs to those firms covered by Wave 1 use cases and their customers. It could, however, be faster than that, and we are keen to work to ambitious timelines to deliver benefits to businesses and consumers. 

We have set the criteria for success, and will monitor the evolution of cVRPs, make any changes or enhancements required, and will move to Waves 2 and 3 when agreed, enabling more billers and merchants to offer cVRPs to their customers.  

This evolution will include e-commerce use cases – being able to use your account to make a purchase from websites and online retailers, for example, although no decisions have been made as to what and when. Again, the National Payments Vision supports this move into e-commerce.   

The shape of things to come 

We anticipate that consumers and businesses will be using cVRPs next year and beyond, and that it will be the first premium API use case of many. We also look forward to seeing the continued evolution of the UK’s world-leading payments ecosystem to deliver further competition, innovation and consumer choice.