It was a long time coming. In April 2023, the Joint Regulatory Oversight Committee (JROC) published its highly anticipated report and provided much-needed clarity on the next steps for Open Banking in the UK. One of the most important aspects of this landmark report was a roadmap for expanding Variable Recurring Payments (VRP) beyond sweeping use cases.

At Tink, we view VRPs as one of the key next steps in Open Banking. We were among the first third-party providers (TPPs) to work on leveraging the transformative benefits of VRPs for commercial use with NatWest. As a champion of VRP, we have been advocating their benefits not just to prospective clients but also to other financial institutions. We have long encouraged banks to move beyond the CMA’s order that mandated sweeping use cases and push forward into a genuinely exciting space: commercialised, non-sweeping VRPs.

It was great to see JROC put VRPs front and centre this Spring. Yet it is also important to note that its recommendations are built upon work that has been taking place in the background for some time now. The crucial piece of the JROC’s recommendations is that they enable the industry to deliver VRPs itself. Rather than waiting for a regulator to come in and decide what needs to be done, the industry can problem-solve and create with end-users in mind. This approach is likely to result in a better product or experience than if banks simply did the minimum to comply with a regulatory order. 

Until now, the industry has been responsible for pushing forward the development of VRPs. We cannot take our foot off the gas. It is critical that the industry collaboration and forward momentum established in the pre-JROC era continues as we work through its roadmap together. 

A Standard for VRPs

A critical part of the roadmap will be the creation of standards, which will play a central role in helping financial institutions execute their own plans to deliver VRPs. These standards will be particularly helpful to banks. NatWest was very forward-thinking in its work to extend VRP beyond sweeping. However, it’s not the only financial institution which is interested in this space. Other banks have a comparable mindset, but have struggled with the amount of work needed to make existing infrastructure work with new core processing and compliance requirements. NatWest had the appetite to move forward first. Now other banks are becoming very interested in VRP. Standards will help to turn this interest into action. 

We have had many positive conversations with banks on VRP. They are keen to bring new payment methods to their customers and meet their expectations for flexible, instant payments with improved visibility. However, they also want to ensure their customers are adequately protected and educated about VRP payments. The industry has a key role to play in educating consumers, which is a separate task from building standards but no less important. Both banks and smaller fintechs can contribute to educating the public, which is clearly not a job that can be left to regulators. If consumers and businesses do not understand the benefits of VRP, they will be far less likely to adopt them. Therefore, education requires further collaboration and a commitment to explaining and evangelising VRPs.

Challenges and Adoption

 The JROC roadmap is not without its challenges. In particular, the plan to implement standard principles in three months could be difficult to achieve. Other initiatives, such as the SEPA Payment Account Access Scheme in the EU, have been relatively long-term projects. A three-month timeframe is certainly ambitious – although not impossible. 

Overall, the VRP initiative is a positive step for the payments industry which will encourage Open Banking adoption. As someone who has been in payments for 15 years, I always use the “parent test” to decide if a new concept is understood by the general public. Have my parents heard of VRP? Not yet. I’m not sure they will ever become familiar with the term ‘VRPs’, which may not become a household name. Instead, I expect the industry to use a more accessible and friendlier term, such as “pay by bank”.

The future of VRPs is still to be determined, but I believe that they definitely do have a key part to play in the next era of payments. JROC has given us the space to innovate and provided a glimpse of the road ahead. Now it’s up to all of us to work together and unlock the next stage of the Open Banking journey.