UK Finance in collaboration with law firm Addleshaw Goddard has unveiled a report focusing on Variable Recurring Payments (VRPs) within commercial contexts in the UK. VRPs represent a payment instruction form enabling customers to authorize registered payment service providers (PSPs) to initiate payments from their bank accounts on an ongoing basis.

Such consent empowers PSPs to execute recurring or subsequent payments, allowing for variations in timing or amount within predetermined limits. While VRPs currently serve specific purposes, their potential benefits for consumers in commercial applications, such as settling phone bills, are notable. The report delineates critical issues and processes necessary for VRP development in commercial spheres and proposes recommendations for addressing these matters through contractual frameworks.

Additionally, the report introduces a series of model contractual terms applicable to agreements between account providers and PSPs engaged in VRP building and development. Key objectives of the model clauses encompass fostering competition, streamlining efficiencies by mitigating some transaction costs associated with bilateral negotiations between payment providers, and ensuring banking customers encounter consistent experiences concerning crucial aspects like safety, security, and assurance. This consistency aims to instill confidence among customers regarding VRP usage in commercial contexts.

The model clauses represent a significant milestone in VRP evolution, potentially affording customers more payment options, enhancing merchant payment receipt methods, and injecting greater competition into the payments landscape. While the clauses are open source and voluntary, UK Finance encourages stakeholders within the open banking ecosystem to consider their utilization where feasible, fostering collaboration to propel VRP adoption and utility. Moreover, the Joint Regulatory Oversight Committee (JROC), comprising the Financial Conduct Authority, Payment Systems Regulator, Competition and Markets Authority, and HM Treasury, recognizes VRPs as a pivotal test case for premium application program interfaces (APIs).

APIs facilitate software developers' integration of data and functionalities from external applications, streamlining processes akin to a weather app sourcing data from a third-party provider. Representatives at UK Finance emphasized the collaborative efforts with various entities, underscoring the significance of VRP progression towards a broader Multilateral Agreement. They expressed anticipation for cooperation with JROC and open banking ecosystem stakeholders to maximize VRPs' potential benefits, emphasizing a customer-centric, commercially driven approach with targeted regulatory support.

Addleshaw Goddard representatives acknowledged the UK's leading open banking infrastructure and the shared vision across the market to further exploit its potential. They lauded the collaboration with UK Finance in developing Commercial Variable Recurring Payments model clauses, heralding it as a positive stride toward unlocking open banking payments' potential. The Financial Services team at Addleshaw Goddard underscores its regulatory insights and strong relationships with UK Finance and leading payments providers as instrumental in this endeavour.

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