Token.io and Open Banking Expo have published ‘The future of Dynamic and Variable Recurring Payments’ research, showcasing the benefits of Variable Recurring Payments (VRPs). With all eyes on the future of Open Banking, the financial ecosystem believes that Variable Recurring Payments (VRPs) will unlock widespread benefits, provided the industry works together to create the market conditions that are needed for success.

These are the findings detailed in a new survey report published by account-to-account (A2A) payment infrastructure provider, Token.io, and Open Banking Expo. VRPs to dominate the payment landscape The results of ‘The future of Dynamic and Variable Recurring Payments’ research point to an industry that is now fully cognisant of the benefits of commercial VRPs (often called non-sweeping or premium APIs). The research’s respondents have chosen commercial VRPs against any other payment types in virtually every category.

Frictionless user experience is believed to be a key driver of consumer adoption. The element of control is another important factor, with respondents saying the ability for users to set a maximum individual payment amount is the most useful parameter. For merchants, appetite and enthusiasm are picking up, as 60% said they will actively seek to convert card payments to VRPs, with faster settlement of funds and greater reliability seen as key benefits.

Merchants also noted the potential for lower cost of processing than cards. 33% of merchants said they want to convert Direct Debits to VRP, although a common concern was that costs could be higher, given the relatively low cost of Direct Debit. Current hurdles in VRP adoption The report does, however, highlight a potential stumbling block to adoption.

While virtually all banks surveyed believe they are likely to benefit commercially by offering VRPs, in reality there is still very limited bank coverage (with the exception of NatWest, whom Token.io announced a VRP partnership with in November 2022). The belief in VRP’s potential must, therefore, be translated into reality through an accelerated bank commitment to test and then scale VRP. While a comprehensive multilateral framework or agreement may be developed in the future, it is crucial that commercial VRPs be first tested and proven across all of the UK’s large retail banks through pilot exercises.

Tonke.io’s representatives said the research reinforces their conviction that commercial VRPs are seen as a faster, more secure, convenient, and cost-effective alternative for recurring payments. Banks believe they will benefit commercially by offering VRPs, and merchants are planning to add VRP as an alternative to card payments. In the meantime, there is still work to be done in increasing adoption and creating market conditions needed for VRPs to become a reality.

An overwhelming 90% of survey respondents said they think contractual frameworks should be standardised for commercial VRPs, and a further 70% believe that a fee structure should be introduced. There was also consensus that the UK requires a similar approach to Europe’s SEPA Payment Account Access (SPAA) scheme. VRPs take the spotlight due to regulation Open Banking Expo’s officials said that what has kept VRP firmly in the spotlight is regulation.

The JROC VRP Working Group is now working on a blueprint for a scalable implementation of commercial VRP, with pilots expected to begin in 2024. Once this is underway, they believe the speed of adoption will increase. When asked which use case the JROC pilot should prioritise, the industry firmly believes e-commerce payments offer the most potential.

This sentiment was echoed during a panel debate at Open Banking Expo with representatives from the Payment System Regulator, Financial Conduct Authority, NatWest, Tink, and Token.io. The race for premium APIs Token.io’s team added that jurisdictions are already developing similar capabilities and schemes for premium APIs. In Europe, for example, the introduction of the European Payment Council’s SPAA scheme is creating a foundation for banks and other players in Europe to go beyond the broad directives outlined in PSD2 and create ‘premium’ Open Banking services, such as Dynamic Recurring Payments, which are analogous to VRP.

Such developments could put the UK at risk of losing its position as a leader in open banking and payments innovation, so it’s important the industry acts quickly to unlock the opportunities that are ready to be realised. For more information about Token.io, please check out the company profile in The Paypers Company Database. .