The UK’s Financial Conduct Authority (FCA) and Payment Systems Regulator (PSR) have unveiled a strategic framework to accelerate the growth of open banking. The initiative aligns with the UK’s broader mission to modernise financial regulations and support economic growth. Central to the plan is the establishment of an independent company to manage variable recurring payments (VRPs). Open banking currently serves over 11.7 million users in the UK and processes more than 22.1 million payments monthly, according to the FCA.
The FCA and PSR plan to establish a new independent operator to oversee VRP implementation, with Open Banking Limited (OBL) leading the initiative. The operator will standardise processes for recurring payments, enabling their use across sectors such as utilities, government services, and financial institutions. This initiative forms part of wider efforts to modernise the financial system and enhance digital payment options.
Independent operator to drive VRP implementation
“We stand ready to play a leading role, embracing a digital-first approach, and with our work spearheaded by a new Executive Director for Payments and Digital Finance who will also lead the Payment Systems Regulator,” wrote FCA Chief Executive Nikhil Rathi in a letter addressed to the Prime Minister, the Chancellor, and the Secretary of State.
Live VRP services are expected to roll out this year, enabling consumers to make automated recurring payments for regular expenses. The plan also includes collaboration with industry stakeholders to develop the commercial frameworks required to expand VRP use and enhance open banking’s role in e-commerce.
Variable recurring payments are designed to give consumers greater control over recurring expenses by allowing them to set limits on payment amounts or monthly spending. This approach is expected to simplify the management of regular payments and increase transparency.
For businesses, VRPs provide an additional option to traditional payment methods, offering the potential to lower processing costs and enhance payment success rates. These developments may contribute to the wider adoption of open banking within e-commerce and other sectors.
The announcement builds on progress achieved in 2024, supported by voluntary funding from 20 industry-leading firms. Notable advancements included enhancements in fraud detection tools, strengthened consumer protections, and the introduction of VRPs. Furthermore, the FCA introduced reforms in areas such as financial advice, pension transfers, and investment product accessibility, laying the groundwork for further advancements in digital finance.
The FCA and PSR emphasised the importance of sustaining the collaborative momentum of 2024. A joint steering committee will oversee ongoing initiatives, ensuring alignment with the UK’s National Payments Vision and government priorities. The FCA has also called for digital infrastructure improvements, such as enhanced digital identity verification and updates to the Companies House database, to support its open banking initiatives.
Both regulators reaffirmed their commitment to working closely with industry stakeholders to ensure the continued success and expansion of open banking in the UK.
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