What Are Variable Recurring Payments?

Variable Recurring Payments (VRPs) allow consumers to connect payment providers with their bank accounts, authorising them to make payments on their behalf.  They’re easier to manage, more convenient, and safer than traditional direct debits. What’s more, they’re growing in importance in today’s digital world.

What Can VRPs Be Used For?

As an example, a consumer might want to set up a subscription service – perhaps for a recurring, monthly purchase or maybe for a health club payment or to manage utility bills.  VRPs offer an alternative to direct debits or standing orders. In using VRPs, consumers can quickly see where they’ve agreed their recurring payment and what the limit is of each payment authorisation. Banks don’t give consumers that information – yes, bank account holders can view their direct debits through their statements, but there’s no cap on future direct debit payments, whereas with VPRs, there’s the ability to place a capped limit.

As well as subscriptions and paying recurring bills such as utilities, VRPs can be used for many payment activities. Here are some more examples:

• Credit and lending.
• Savings and personal finance.
• To top up bank accounts (and therefore avoid overdraft fees).
• One-click checkouts.
• To manage late payments.

The parameter of each VRP payment is defined so the customer knows how much is going out and when – the end date is also agreed at the set-up stage. Additionally, VRPs are easy to set up, the payment amount can be altered easily, and customers can react to any alterations to payments in real time.

Lower Transaction Fees Compared To Cards & Direct Debits

As well as more transparency and greater efficiency for customers, and more control, for businesses VRPs offer lower transaction fees to cards and direct debits. Additionally, there’s less chance of errors because the process is so transparent.

The system is completely automated too, removing the need for manual input and  offering tremendous convenience for businesses and customers.

In a nutshell:

• VRPs offer excellent innovation in financial products responding to the needs of a digital world.
• Consumers stay in control of recurring payments.
• For businesses, there’s minimal cost and reduced risk of error.
• VRPs are automated, removing the need for manual input.
• Funds settle almost immediately.
• Completely transparent, customers can stay on top of their recurring payments and react to changes in real time.
• SCA compliant, VRPs are safe and secure because the bank uses customer authentication to reduce fraud and unauthorised transactions. There’s no card details or passwords involved.
• VRPs are user friendly.

What About Sweeping?

Variable Recurring Payments can be used for sweeping and non-sweeping. Sweeping allows customers to move their money between bank accounts and to organise recurring payments (this could be to pay off a loan or to move money from a bank account to a building society account).  Non-sweeping use includes subscriptions, utility bills, rental payments, and payments for streaming services and other similar types of payments.

VRPs are another aspect of Open Banking payments designed to streamline recurring payments and move away from traditional direct debits and standing orders. Faster, safer, and easier to manage, the process gives customers and businesses more flexibility for a number of different payment activities.