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In a “significant move for the industry”, firms across the UK payments ecosystem have set up a new company dedicated to the initial phase of funding for commercial variable recurring payments (cVRPs).
A total of 31 organisations from across the open banking and payments industries have committed to fund initial efforts to create a new company that will carry forward work to establish cVRPs on a viable commercial footing.
Firms including fintechs Wise and TrueLayer, as well as incumbents in retail payments such as NatWest, Nationwide and Barclays, have come together on the initiative, which appears to have been overseen by Open Banking Limited (OBL), the UK’s standards setter.
“This is a significant moment for the industry, and I sincerely thank the organisations that have committed to fund efforts to create a company that will carry forward the important work on cVRPs,” said Henk Van Hulle, OBL’s CEO.
“It is testament to the collaborative nature of our ecosystem that it can be industry-led.”
This new entity will be wholly owned and run by industry. A decision on enduring funding for the entity will be made after this initial phase of work.
“As a collective industry, we will continue to harness the commercial opportunities that lie before us, giving greater choice to our citizens and businesses as well as delivering wider economic growth,” said Van Hulle.
The proposed initial use cases for cVRPs will focus on selected regulated industries such as payments to utility and rail companies, regulated financial firms, e-money institutions, government bodies and charities.
Using cVRPs in these areas would give consumers better control over regular payments, as well as a frictionless payment experience when buying goods or services from websites.
Everyone’s a winner?
The initiative to develop cVRPs brings new opportunities for both fintechs and banks to improve and bolster their offerings, create new revenue streams and upgrade customer experience.
However, realising these benefits will be challenging. It will require addressing implementation challenges and fostering widespread market adoption.
Both banks and fintechs may face costs in developing and integrating the necessary infrastructure to support cVRPs. This includes updating systems, ensuring compliance with regulations and educating consumers about the new payment options.
The initial funding and enthusiasm are promising, but long-term success will require ongoing collaboration and investment from participating organisations.
The effectiveness of cVRPs hinges on winning consumers’ trust, as well as their willing to transition from established payment methods.
Like other payment methods, cVRPs may need a "big bang" moment, such as Transport For London’s decision to allow commuters to tap in and out using their cards, which benefited contactless hugely.
Transport could be an avenue of opportunity for CVRPs, too. For example, parking facilities could implement cVRPs to charge customers based on the actual duration of parking, with the exact fee automatically deducted upon exit, eliminating the need for manual payment or ticket validation.
When it comes to train commuting and cases of disruptions, or changes in travel plans, cVRPs could also open up the opportunity for real-time fare adjustments, so that customers are charged accurately for the services used without clunky forms to launch refunds.
With effective collaboration and a smooth implementation, cVRPs have the potential to transform the UK's payment ecosystem for the better, but genuine investment and input from across the ecosystem will be necessary if they are to work.
