Key developments in Variable Recurring Payments

Variable Recurring Payments (VRPs) have attracted increasing attention in the payments arena for some time and recent developments expand their commercial use case in the form of Commercial Variable Recurring Payments (cVRPs).

What are VRPs?

VRPs are a form of payment instruction which enable customers to facilitate account to account (A2A) payments via payment service providers (PSPs). On a technical level, they rely on Open Banking technology and involve the use of APIs to unlock access to customer bank accounts for Payment Initiation Service Providers authorised by the relevant customer to make payments on their behalf.

One VRP use case already heavily adopted at the consumer level in the UK is “sweeping” – where users can easily move variable amounts from their current account to a savings account, for example by “saving the change” from their daily purchases made by a card linked to their current account.

cVRPs allow businesses and consumers to make recurring payments of varying amounts, within agreed limits, using Open Banking APIs.  Users set up a mandate to allow the merchant / retailer to take payments from their account.  cVRPs are viewed as offering users more transparency and control over their payments than traditional recurring payment methods, like direct debits, and look prime for further expansion in the UK.  Some perceived advantages for VRPs (and cVRPs) include:

   
• users being able to view and control payment permission parameters in real time, including timings and amounts, as opposed to the “fixed” schedules offered by direct debit;
   
• VRPs using Strong Customer Authentication, which offers greater security on transactions;
   
• VRPs using the Faster Payments network, allowing payments to clear quicker;
   
• potentially lower transaction costs and higher completion rates.

What is the latest?

In January 2025, the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) set out their plans for the next steps of Open Banking, including the establishment of an independent central operator to coordinate how VRPs are processed.

A key regulatory aim for 2025 is to see live cVRP services available to consumers on a limited scope basis (allowing payments to specific regulated sector operators, including utility providers, the UK Government and regulated financial services firms).

Recently (in May), 31 organisations across the payments landscape including banks and PSPs announced they will jointly fund industry efforts under a “multi-lateral agreement” (through the central operator model proposed by the FCA and PSR) to accelerate the development of cVRPs on a phased basis.

Why does it matter?

The UK Government’s National Payments Vision (NPV) published in late 2024 sets out core strategic aims of driving market innovation, investment and competition, through an industry-led approach, and also called out Open Banking and A2A payments as key potential accelerators for the UK payments market (we've written an article explaining our take on the NPV).

Increased adoption of VRPs / cVRPs therefore dovetails with the Government’s strategy and they represent attractive propositions for PSPs and users (both at a consumer and enterprise level) – a sense reinforced by the wide range of established banks and PSPs that have committed to the joint funding initiative.

What’s next?

Open Banking Limited, the body tasked with driving forward Open Banking in the UK, said in late 2024 that it hopes to see cVRPs offered in the limited scope use cases set out above by mid-2025, although given the joint funding details have only just been agreed it seems realistic to assume there may be changes to those timescales.

While the latest steps are only really the first of a multi-phased approach (each phase of which will be subject to separate rounds of evaluation and alignment), the direction of travel is clearly towards developing tangible use cases to fuel the wider UK adoption of VRPs and cVRPs.

We’ll be keeping an eye on developments including on the regulatory side as the FCA (which is taking over the PSR’s remit) will continue to play a key role in shaping VRPs / cVRPs in the UK.

How TLT can help

PSPs and other businesses looking to leverage VRPs / cVRPs need to track developments and understand how they impact their proposed strategy, products and underlying contractual arrangements founded upon these models.

TLT’s payments team includes industry specialists covering all contractual, data protection, regulatory, technology and other legal issues impacting VRPs and cVRPs.  If you need any support in this space, we are here to help, so please do get in touch.

Written by Alex Williamson, with contributions by Ed Jeffrey

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2025. Specific advice should be sought for specific cases. For more information see our terms and conditions.