cVRPs will power the next era of personalised investing

Our investing platform runs on a payment stack: Direct Debit for recurring investments; cards, including Apple Pay, for top-ups and service subscriptions; and a mix of cards and open banking for one-off transfers.

So where might commercial Variable Recurring Payments (cVRPs, which GoCardless offers as Recurring Pay by Bank) fit into the mix? To answer that, I feel it helps to think less about which rail they’ll replace, and more about where they add capabilities the others don’t.

Where are cVRPs likely to land first?

I come from an open banking background and was involved in developing early sweeping VRP use cases at a previous business.

That experience taught me to respect how long it really takes for new payment types to see meaningful adoption. For now, that means we want to see how investment-specific cVRP use cases mature across the industry before we add them to our roadmap. 

But, when the time comes, they’ll certainly be an exciting addition to our toolkit and there are two near-term areas where I see them earning their place.

The first is flexibility in recurring investments. cVRPs add a flexible layer to recurring payments that Direct Debit was never really designed for: variable amounts under one authorisation, customer-controlled changes and the ability to check funds are there before requesting payment. That control and flexibility might help more customers commit to investing regularly, because it’s daunting to sign, say, a £500-a-month Direct Debit mandate that can’t be easily and instantly changed. 

The second is modernising and optimising top-ups and subscriptions.

We use Apple Pay and cards for one-off account top-ups, and cards for paid subscriptions. As a mobile-first business, decoupling these payments from cards and switching them to this new payment method opens the opportunity to create tighter, even one-click, payment flows. Operationally, cVRPs also have an edge over cards because bank accounts don’t expire and account-to-account payments are cheaper than cards — I wasn’t surprised to read that card payment issues cost businesses around 3.5% of monthly revenue. 

Opening the door to adaptive investing

Longer-term, things get more interesting for me.

No two investors are the same. Everyone has different goals, timelines and financial circumstances; and those circumstances are always changing.

cVRPs would allow a platform like ours to respond to that variability, by adapting to whether a user has more or less disposable income in a given month, or whether their goals have changed because they’ve just bought a property or had a baby.

That’s cool, but an even bigger opportunity sits where AI and open banking data converge. In theory, AI could analyse open banking data to make personalised recommendations and then execute payments via cVRP.

Imagine a user tells their investment platform they want to save enough for a house deposit in five years. They can set the target property price, and AI can combine that with open banking data to forecast how to get there: “Based on your current circumstances, you can invest X, which means your timeline expands to Y. Here’s what you could change.” So with cVRPs and AI, a user could see exactly how much they could be reasonably saving and adjust their deposited amounts on the fly. 

That’s truly personalised investing, and it only really becomes possible once you have a flexible recurring payment rail like cVRP.

Three things that need to happen first

For cVRPs to realise their full potential, and to ensure adoption isn’t delayed, three areas need attention from regulators and payment service providers.

First, consumers need educating on what exactly cVRPs are. I have a feeling that if you ask a customer to “set up a variable recurring payment mandate,” their first thought will be “what does that even mean?”

Second, consumers need to feel in control. Customers should be able to see exactly what they have authorised, where it is going, how much can be taken and how to cancel it all with ease. Yet this also needs to happen without customers having to re-authorise access constantly and the VRP process feeling like a burden.  

Finally, the technical foundation needs to be rock solid. Regulators and banks should prioritise quality rather than speed to market when launching cVRPs, because building trust will be crucial to driving adoption. If we’re to create great user experiences on top of the technology, then we need clear reason codes and seamless error handling from banks’ and payment partners’ APIs. Because if something does break, we can’t have customers left wondering what happened to their £5,000 pound investment. 

A patient revolution worth waiting for

cVRPs will change what’s possible in investments. The technology is here so now the work is to land the rollout in a way that builds trust so that adoption can accelerate.

Get that right and the next era of investing can move from thought experiment to reality.

When you invest your capital is at risk

This is a guest article from one of our customers, Freetrade. Read 'Revolutionising recurring revenue' for more insights into the strategic opportunity of cVRPs.