Understanding the benefits of Variable Recurring Payments (VRPs) and sweeping

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Last editedOct 20222 min read

Since launching four years ago, Open Banking in the UK has been progressively gaining momentum. There are now over 4.5 million regular users with 2021 seeing a 60% increase in new customers - making it Open Banking’s most significant growth period to date. Whilst payment progress is historically slow and steady - 2022 is already shaping up to be another stand out year for open banking thanks to Variable Recurring Payments (VRP).

Overview of Variable Recurring Payments and sweeping

VRPs enable recurring account-to-account payments in a similar way to direct debit. The key difference is that they are powered by Open Banking, meaning that they provide instant recurring payments when speed and security matter most. The UK’s Competition and Markets Authority has set the top nine UK banks a deadline of July 2022 to work with Third Pary Providers (TPPs) like GoCardless to launch VRPs for sweeping use cases.

Sweeping, also known as ‘me-to-me’ payments, is the automatic transfer of money between two accounts belonging to the same person. You can read more detail about VRPs and sweeping in our blog on ‘Understanding VRPs’.

How VRPs will improve money management

Think of current Accounting Information Services (AIS) as read-only data. You can log in and see your current cash position, gaining an understanding of areas to improve or change. When you add in VRPs this transforms into being able to both read and write. You’ll be able to log in, understand your cash position and then take immediate action, moving money between accounts as required.

Bearing this in mind, it will come as no surprise when we say that the launch of VRP sweeping will see added value for money management apps. The added capabilities will enable money management apps to launch additional tools and functionality, which in turn will make them more appealing to consumers. A great example of this is the money management app Plum, which we recently launched a customer story with. Plum enables users to regularly set aside as much or as little as they want to be invested in a range of products. Plum’s Head of Operations, Elise Nunn, shared with us that they are already planning on how they can incorporate VRPs into their payments strategy, saying: “VRPs will allow us to both process payments instantly and vary the amount customers invest in line with their financial situation at any given moment – all part of continuing to be a responsive wealth creation partner for them.”

Money management apps embracing VRPs will appeal to millennials and Gen Z

Last year we partnered with YouGov to launch a new Consumer Payment Preferences Report, based on the results of over 15,000 surveyed consumers. One of the key findings was that people want quick and easy payment experiences, with automation being one of the top reasons people choose direct debit.

More interestingly, if we dive deeper into results by generation, Millennials and Gen Z are more likely to be debt-averse and budget-conscious. They are also more tech-savvy, preferring mobile apps to manage payments. All of these factors combined could make them the ideal audience for embracing money management apps utilising VRPs.

Sweeping is an exciting first step and if it all goes as planned, with high consumer interest, banks and TPPs will be able to use sweeping as an opportunity to monitor and improve the user experience before work begins on launching VRPs for much more complex recurring use cases.