Global: PSR Outlines Next Steps for Expanding Variable Recurring Payments in the UK

Variable Recurring Payments (VRPs) are a new form of payment instruction that allows customers to authorize registered payment service providers to initiate payments from their bank accounts on an ongoing basis, with flexibility in timing and amount within agreed limits.

In late 2023, UK financial regulators approved a Phase 1 rollout of non-sweeping VRPs, targeted for the third quarter of 2024. The initial phase is set to focus on payments to regulated utilities, financial services, and central and local government entities. This move is seen as the first step in broadening the use of VRPs and enhancing open banking payments across various sectors.

The Payment Systems Regulator (PSR) recently sought stakeholder feedback on these plans, and the published responses highlighted several key areas for consideration:

Mandated Participation: While there was support for some level of mandated participation in VRPs, stakeholders suggested that the PSR should not limit its focus to the major nine lenders (CMA9). The PSR acknowledged this feedback, emphasizing that a sufficient number of consumer accounts supporting VRPs is critical for the success of Phase 1. The regulator will continue to evaluate the necessity and extent of mandated participation to ensure a broad adoption.

Coordinated Expansion Through a Multilateral Agreement (MLA): Stakeholders generally supported greater coordination in VRP implementation, though concerns were raised about the need for an MLA and whether it should include a central pricing model. The PSR still views an MLA as a potentially effective way to manage relationships between sending firms and payment initiation service providers. The regulator plans to work closely with the VRP implementation group to define specific rules for an MLA and determine the best entity to manage it.

Pricing Principles and Potential Price Intervention: While there was a consensus on the need for some form of central pricing, opinions varied on the best approach to pricing API access for VRPs during Phase 1. The PSR will explore different pricing models and continue evaluating the most effective approach to ensure fair and competitive access.

The PSR plans to release updated proposals in the autumn, inviting further feedback from stakeholders.

Kate Fitzgerald, Head of Policy at the PSR, commented, “This is an important step in maintaining the momentum needed to expand the use of VRPs. We will continue to collaborate closely with the ecosystem to ensure that this expansion happens effectively. Our goal is to identify where regulation can have the most significant impact—promoting competition and driving better value and outcomes for consumers.”