Variable Recurring Payments: The New Frontier in European Open Banking?
VRPs provide a new way for banking customers to arrange pre-authorized payments. Europe and the UK are pioneering the open finance trend.
Key Takeaways
- Variable recurring payments (VRPs) are pre-authorized, automated payments that allow customers to set maximum transaction amounts and other limits
- As a type of open banking, VRPs provide greater flexibility and advantages than other automated payment options such as direct debit
- The UK is leading VRP efforts, and Europe is expected to learn from its approach
Variable Recurring Payments in Europe and the UK?
Europe and the UK are increasingly exploring variable recurring payments (VRPs).
VRPs are pre-authorized payments that allow an account holder to arrange transactions of varying sizes by setting maximum amount limits and transaction frequencies.
Compared to alternatives, such as direct debit, variable recurring payments are easy to modify and cancel.
VRPs can also provide instant settlement, lower fees and transaction costs, better security and transparency, and other improvements over their traditional counterparts.
VRPs are considered a type of open banking, which allows third parties to take part in banking activities with customer permission. Specifically, VRPs involve Payment Initiation Service Providers (PISPs), or services that perform the necessary transactions on behalf of users.
Payment Industry Excited About VRPs
A recent report from Finextra cites several payment industry members who believe VRP technology will grow in Europe and the UK in the near future.
Andrew Boyajian, an executive at the open banking platform Tink, said that he expects VRPs to achieve their full potential in the coming years.
Boyajian said that existing commercial payments are “clunky and awkward,” whereas VRP payments are transformational and give businesses a competitive advantage.
Francesco Simoneschi, CEO of the open banking platform TrueLayer, asserted that VRPs are “poised to revolutionise” financial services. He said banks are offering VRP features competitively, noting that TrueLayer is working with NatWest and others to offer the feature.
Boyajian said VRPs can be used for payments such as streaming subscriptions and utility bills, while Simoneschi described applications in grocery subscriptions and charity donations.
Europe Expected to Follow UK
Finextra said that European regulators are building an open finance architecture but acknowledged that the UK is ahead of Europe’s progress on VRPs.
Europe can learn from the UK to ensure a “smooth transition,” it said.
In the UK, the Competition and Markets Authority (CMA) has already mandated the implementation of VRPs at nine major banks. Additionally, the UK’s Payment Systems Regulator (PSR) has begun a consultation to expand VRPs across the country.
Simoneschi commented on the latter effort. He said that the UK’s PSR should provide incentives that help banks monetize VRP and encourage them to go beyond minimum regulatory requirements. Doing so will create a system that “works for all parties,” he said.
Finextra also distinguished two types of variable recurring payments: commercial VRPs and sweeping VRPs. The former involves payments between customers and businesses, while the latter allows account holders to automatically move funds between their own accounts.
Sweeping VRPs are currently available in the UK but not Europe.
Frequently asked questions
What is a multi-currency account/virtual IBAN?
A Payset multi-currency account allows you to receive money in 34 different currencies and send money in up to 38 currencies, all within the same account.
You can deposit and withdraw funds, convert currencies at competitive exchange rates, and hold your chosen currencies to capitalize on market movements.
A Payset multi-currency account allows startups and business owners to receive payments from clients virtually anywhere in the world and pay suppliers, staff, and contractors quickly and affordably in their chosen currency.
- Funds can be deposited and withdrawn from the account for a small fee.
- Account holders can send and receive money with other Payset users for free.
- Depending on your region, you can use various payment networks from your Payset account, including SWIFT, SEPA, ACH, Fedwire, Faster Payments, BACS, and CHAPS.
- Once you register an account, you will be provided with a Virtual IBAN (International Bank Account Number), which makes all of these transfers easy.
- We provide you with local payments and collections. For example, transactions in USD, EUR, CAD, and GBP are processed through the local payment networks, which is far cheaper and takes minutes as opposed to days
Are there limits on the amount of money I can send and receive?
No, there are no transaction limits on Payset multi-currency accounts.
However, higher-volume transactions may require additional anti-fraud verification. If you plan to make a large transaction, contact us in advance to avoid verification delays.
How is Payset regulated?
Payset is regulated as an authorized Electronic Money Institution by the UK Financial Conduct Authority. Our activities are also regulated by the Payment Services Regulation 2017 and the Electronic Money Regulation 2011 (SI 2011/99).
How do I add money to my account?
How do I send money from my account?
Once you have opened your verified IBAN account and added money to a balance, transferring funds is simple.
Simply log in into your account and add a beneficiary, then simply “make a transfer” in your preferred currency to that beneficiary.
Types of Multi-Currency Accounts
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