Redefining recurring payments: The VRP potential

The way businesses collect recurring payments is changing. Today, you can collect recurring payments through Direct Debit, recurring card payments, or by manually asking your customers to send you payment.

This is set to change with the introduction of Variable Recurring Payments (VRPs). VRPs offer the potential to collect recurring payments for different amounts, via open banking. They bring the flexibility of one-off payments together with the security, reliability and cost effectiveness of Direct Debit payments.

VRPs present a way of collecting payments that’s not previously been available before and will benefit businesses in a number of ways.

Speed

Using API technology, payment providers can ‘talk’ directly to your customers' banks to verify their details and initiate the payment. The process redirects customers to their online banking, requiring them to verify upfront that they own the account and that the payment is authorised. This means that payment confirmation is instant.

Once payment is confirmed, funds can settle in under a day using the Faster Payments rails. That’s up to seven times faster than card payments and five times faster than traditional bank payments such as Direct Debit.

Security

Biometric verification doesn’t just mean the whole process is quicker, it also means it's much more secure. Biometrics are very hard to fake, and by verifying a payer at the time of payment, authorisation is guaranteed there and then, without the need to check if they’re a secure payer.

Reliability

The instant verification also significantly reduces the chance of the payment failing or not processing correctly. Because the payment is authorised right there and then and comes directly from their bank account, there are fewer intermediaries and processes that can fall down.

Cards, on the other hand, can fail up to 8% of the time as they expire or are lost, and traditional bank debit can fail up to 7% of the time.*

*GoCardless Payment Success Index 2020

Cost savings

Card fees are notoriously expensive and can cost up to 4% of the overall transaction. VRPs, on the other hand, powered by open banking, are a lot cheaper to process and therefore have lower fees. Open banking payments with GoCardless are typically 54% cheaper than online card transactions.

Flexibility

VRPs will offer the same level of security and reliability of traditional Direct Debit payments with one significant advantage: flexibility. Customers will be able to adjust the amount and how often they pay. This is great for utilities, for example, who may need to adjust payments based on usage but typically use Direct Debit, where it’s difficult to do so.

It also provides a much cheaper and more reliable alternative to collecting payments for retail or e-commerce businesses that typically do card-on-file transactions.

So how can you use VRPs?

VRPs are only available in ‘sweeping’ use cases at the moment. This is where a transaction is made between two accounts owned by the same person. Examples of this are regular deposits to savings accounts or loan repayments on credit cards.

The next milestone in the development of open banking payments is commercial VRPs. It essentially means the opening up of VRPs to be used in a commercial setting, i.e., payments going from a customer account to an account owned by a business.

This wider rollout is now set to happen in the early part of 2026 and only available to ‘wave one’ sectors to begin with, which include charities, government agencies, and FSCS-protected services. Industries such as energy and utilities are tipped to follow with the hope of e-commerce use cases expanding later in the year.

Reliability and flexibility in one place

VRPs are not just another way to collect recurring payments. They build on the reliability and cost-effectiveness of Direct Debit payments whilst offering greater flexibility and speed. There’s still work to be done between the regulators, government, and the wider payments industry to make them a reality, but when they are, they’ll be transformative for how we collect payments in the UK.

To find out more about VRPs and the roadmap, take a look at these other articles:

• The open banking roadmap: What’s next for VRPs?

• Open banking providers explained