Is Recurring Pay by Bank the future of recurring payments?

Cards and Direct Debit have been the backbone of recurring payments for decades. Now a new method is emerging that promises faster confirmation, fewer failures, and no chargebacks. Could Recurring Pay by Bank change how businesses collect recurring revenue for good?

If you run a subscription or recurring revenue business, you'll know the feeling. A customer signs up, everything looks good, and then a few months later, a renewal or recurring charge comes back declined. No warning. No clear reason. The customer didn't cancel – the payment just didn't go through.

It's one of the most common and most quietly expensive problems in recurring payments. And for many businesses, it's still largely accepted as the cost of doing business.

The problem with how we collect recurring payments today

Most businesses in the UK collect recurring payments using Direct Debit, cards, or a combination of both. Both methods work, up to a point.

Direct Debit is reliable and low-cost. But it runs on the Bacs scheme, which means payment confirmation takes three to five days. This lag creates a cash flow gap – and if a payment fails, you've often already delivered the service, missed a deadline, or lost the window to act before you even know there's a problem. 

According to our research report, Revolutionising recurring revenue: The strategic opportunity of commercial VRPs, 27% of businesses using Direct Debit report failures caused by insufficient funds. By the time that surfaces, the damage is already done.

And for businesses where the amount varies – energy bills, flexible insurance premiums, savings account top-ups – the problem compounds. Direct Debit requires workarounds for anything that doesn't fit a fixed amount, slowing things down for both sides.

Cards are faster, but come with their own failures at renewal. Expiry gets the blame most often – in practice, most banks now update card numbers automatically when a card is renewed. The real culprits are more subtle: fraud flags triggered by a changed billing amount, charges declined because funds weren't there, and card numbers invalidated when a customer was issued a replacement. The result? 29% of businesses using cards struggle with failed recurring transactions.*

The common thread is that most of these failures aren't customers choosing to leave. They're the payment method letting both sides down at the wrong moment, and quietly writing off revenue that should have been collected.

What Recurring Pay by Bank actually is

Recurring Pay by Bank is a new type of bank-to-bank payment method that enables variable, recurring payments without needing to re-authorise every time. Think of it as an alternative to Direct Debit, rebuilt with the speed and visibility of open banking. (It’s sometimes also referred to as ‘commercial VRP’ or ‘open banking recurring payments’.) 

A customer authorises the payment once through their banking app, setting an agreed limit on what can be collected. From that point, a business can collect any amount within those limits, on any schedule, without the customer needing to do anything again. No card details, no repeat authentication, no Direct Debit mandate.

Before each collection, a check is run directly against the customer's bank account to confirm the funds are there. If they're not, the business finds out immediately – before the service is delivered, before the deadline passes, before a customer relationship is at risk.

Payment confirmation is instant. Settlement is same-day. And because authentication happens at the bank level via biometrics, there are no chargebacks. That's the foundation that our solution for open banking recurring payments, Recurring Pay by Bank, is built on.

So is it any better?

For a lot of recurring revenue business use cases, it looks like a significant step forward. The businesses likely to benefit most from Recurring Pay by Bank are those with variable billing and collection, where the combination of variable amounts and payment timing genuinely matters.

Energy, utilities and telecoms businesses deal with bills that shift month-to-month with usage. A fixed Direct Debit will routinely over- or under-collect, and the mismatch generates complaints as well as bad debt. Collecting the exact amount owed, with a balance check run upfront, tackles both problems at once.

Savings and investment platforms and pension providers know the pain of a contribution that misses a deadline because of Bacs lag. When an ISA or pension deadline falls on a particular day, a payment needs to clear on that day. Same-day settlement makes that possible in a way that Direct Debit simply can't.

For subscription businesses more broadly, the appeal is straightforward: fewer silent failures at renewal, no chargebacks to dispute, and real-time confirmation that a payment has actually cleared.

Where Recurring Pay by Bank goes further than the scheme

The commercial VRP scheme is available to any provider connected to it. What we've added on top is specific to GoCardless – and it maps to the three things that matter most when you're collecting recurring payments at scale: conversion, coverage, and cash flow.

More payments, less friction. If a payment does fail, automatic retry kicks in throughout the same day at no extra cost – recovering payments that would otherwise be written off. And Bank Guess, our own feature, recognises more than 80% of UK payers automatically at checkout, pre-filling their bank details before they've typed a character. Less friction at the moment of authorisation means fewer drop-offs.

Every customer, from day one. For any customer whose bank isn't supported yet, we automatically route the payment through Direct Debit instead. No gaps in coverage, no lost revenue, no action needed from you or your customer.

Cash in hand, same day. Payments settle the same day – faster than Direct Debit. Once settled, the money stays: there's no chargeback exposure to manage. And because you collect on your own schedule rather than waiting for a processing window, you're not at the mercy of the next Direct Debit run.

The bigger question

The direction of travel is clear. Bank-to-bank payments are faster, more transparent, and cheaper to process. The long-standing limitations of Direct Debit and cards – settlement lag, silent failures, chargeback exposure – are structural problems that won't be solved by incremental updates. 

The question isn't whether Recurring Pay by Bank will reshape how businesses collect recurring revenue. It's how quickly businesses move to get ahead of it.

Ready to find out if it's right for you?

Contact our sales team to talk through your use case with a payments expert. 

*Revolutionising recurring revenue: The strategic opportunity of commercial VRPs, GoCardless, 2026