PSR sets out the next steps for variable recurring payments in the UK

editorial

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VRPs are a form of payment instructions that allow customers to authorize registered payment service providers to issue payments from their bank account on an ongoing basis, although the timing or amount may vary within agreed limits.

Late last year, financial regulators agreed plans for a Phase 1 rollout of non-sweep VRPs by the third quarter of 2024. The draft recommends payments to regulated utilities, regulated financial services and central and local governments as a first step towards creating more comprehensive coverage used for VRP and Open Banking payments.

The PSR requested feedback from stakeholders on the plans, which have now been implemented publishedhighlighting some potential areas for optimization:

• Mandatory participation: There was support for some level of mandatory participation, but also a suggestion that the PSR should not just focus on the big nine lenders (CMA9). The regulator says it agrees, but still believes that a sufficiently large number of consumer accounts supporting VRPs is critical to the success of Phase 1 and will “continue to assess the need and scope of the mandated Evaluate participation”.
• Coordinating expansion through a multilateral agreement (MLA): There was support for greater coordination, but concerns were expressed about the need for an MLA and whether it should include a central prize. However, the PSR remains convinced that an MLA could be an efficient way to manage the relationships between sending companies and payment initiation service providers. The PSR will work closely with the VRP Implementation Group to consider what specific rules an MLA should contain and who may be best suited to implement them.
• Pricing principles and possible pricing interventions: While most respondents supported the need for some form of central pricing, there were mixed views on how best to price API access for VRPs in Phase 1. According to PSR, various pricing approaches are being evaluated.

The regulator will now present updated proposals for further stakeholder comments in the autumn.

Kate Fitzgerald, head of policy at PSR, said: “This is an important step in maintaining momentum to expand the use of VRPs. We will continue to work closely with the ecosystem to ensure this is done effectively and to identify where regulation will have the greatest impact – to promote competition and deliver better value and outcomes for consumers.”