In autumn 2024, the Competition and Markets Authority (CMA) confirmed the completion of the final ‘Roadmap for Open Banking.’ This meant that all nine major banks under its purview had implemented key open banking services, including Variable Recurring Payments (VRPs) for sweeping.
Enabled by Open Banking APIs, sweeping allowed customers to set up automated transfers between two bank accounts in their name based on pre-defined instructions: for example, moving money from a current account to a savings account to take advantage of improved interest rates, or moving money to protect against a negative account balance and the resulting overdraft fees.
Implementing VRPs for sweeping was an important milestone, but its impact has not been transformative. If the UK is serious about being a global leader in open banking, it needs to show tangible success with upcoming implementations of Commercial Variable Recurring Payments (cVRPs).
Making VRPs work for businesses
cVRPs function similarly to Direct Debit, enabling account-to-account (A2A) payments at regular intervals based on preset mandates for the payer. But unlike Direct Debit, which turns 55 this year, VRPs are built for modern payment behaviours: they enable automatic adjustments to the payment, without requiring additional steps from the payer, so long as they are within the initial terms agreed.
This year, VRPs will take a significant step forward, with the launch of new commercial applications. Driving this initiative forward in the UK is the Financial Conduct Authority (FCA), which has recently taken ownership of the regulatory oversight for open banking. As part of the Starmer government’s work to slash red tape, the FCA is absorbing the Payment System Regular (PSR), which was due to oversee the upcoming roll-out of cVRPs.
The FCA is therefore playing a key role in supporting the ‘Phase 1’ roll-out of “lower-risk” commercial VRPs, focused on local and central government, utility payments and charitable donations. It is supported by the Joint Regulatory Oversight Committee (JROC), which is also heavily involved in shaping Open Banking’s future, alongside the OBIE (Open Banking Implementation Entity), which will be responsible for ensuring the infrastructure works correctly.
A cVRP multilateral agreement (MLA) public consultation has just closed and the documents are expected to be published by the end of March, designed to enable easier market access for participants and provide clarity on the required functionality, pricing, dispute resolution and liability.
The rollout of Commercial VRPs is expected to commence from Q3 this year, with eCommerce VRPs expected to follow in 2026. So far, the focus on cVRPs has largely centred on consumer-to-business (C2B) payments, for regular bills and subscriptions. If the payment method can be effectively applied to the trillion-dollar B2B payments ecosystem too, we might see the most tangible success story so far in the open banking era.
Are commercial VRPs suited to B2B payments?
Currently, a third of businesses spend up to one working week every month managing payments, which is time better spent meeting customers and engaging with suppliers.
VRPs could help free up this time. They are designed as a set of payment instructions, enabling a buyer to set up several payments in one go. This puts buyers in control, flexing the timing and amount of a recurring payment based on the level of service delivered. Not only will this reduce administrative overhead, but also facilitate real-time settlement to support a healthy cash flow and better liquidity. Better visibility of incoming and outgoing payments, moreover, will allow businesses to reinvest with greater confidence and grow their operations.
As an A2A payment process, VRPs bypass card schemes, so businesses can potentially avoid interchange fees. This is particularly attractive to businesses operating at scale, as well as SMEs with tight margins. Security is also boosted by employing Strong Customer Authentication (SCA) – a requirement of the Second Payment Services Directive (PSD2) – at the start of the process, verifying identity before any funds are transferred, boosting convenience and further reducing the risk of fraud.
Will cVRPs transform B2B payments?
Yes and no. cVRPs will bring significant benefits to many businesses, reducing administrative demands on recurring invoices, such as payments for regular stock, IT subscriptions or licences, or payments to the supply chain and subcontractors.
But will they replace the way we pay for B2B goods and services? Time will tell, but with B2B use of commercial cards increasing dramatically – Datos Insights reports that worldwide commercial card spending has surpassed US $4 trillion for the first time – cVRPs will have to quickly earn trust and deliver value once integrated.
One challenge is that cards are deeply integrated into business payment systems, as well as in the wallets of commercial cardholders, who can benefit from attractive reward schemes. Cards also enable tracking tools and extended payment terms that can be preferable to many business buyers. B2B transactions can be complex, requiring multiple layers of authorization that VRPs aren’t equipped to handle.
It is likely that cVRPs will complement, not replace, commercial (or indeed, virtual) cards. They are well-suited to recurring invoices, for regular, predictable supplier payments. But more needs to be done before we can reach this point: better technical integration, more regulatory oversight, closer collaboration between banks, TPPs (third-party providers), and learning from the lower-risk rollouts taking place this year.
Cards will remain dominant for big-ticket transactions, but if managed well, cVRPs could help lighten the load, managing regular, flexible payments and encouraging prompt payment, preferred supplier status and repeat business.
Pat Bermingham is the CEO of Adflex
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