Unlocking UK recurring payments: how variable recurring payments can be commercial

Mark Beresford and Volker Schloenvoigt of Edgar, Dunn & Company (EDC) explain how commercial Variable Recurring Payments (cVRPs) can modernise UK recurring payments through Open Banking, offering greater control, flexibility, and reliability for consumers and businesses alike.

The Joint Regulatory Oversight Committee (JROC), through its Variable Recurring Payments (Non-Sweeping) Working Group, describes commercial Variable Recurring Payments (cVRPs) as a new form of payment instruction that allows businesses to collect variable amounts from customers’ bank accounts on a recurring basis, while giving customers greater visibility and control over payments.

If you, as the reader of this article, are wondering what problem commercial Variable Recurring Payments are trying to solve, consider this: most of your recurring payments, such as gas and electricity bills or subscriptions, are likely to be paid via Direct Debit mandates or a ‘card on file’ arrangement.

The Direct Debit system has been working adequately since its introduction in the UK in the late 1960s. More than 60,000 organisations are using it. It might be clunky, unsophisticated, and a little bit troublesome when there are exceptions to be dealt with from an Account Servicing Payment Service Provider’s (ASPSP) perspective, but Direct Debits work. The Office for National Statistics (ONS) stated that around 50 million people in the UK use Direct Debits. However, a significant number of vulnerable customers and those who live paycheque to paycheque require more control and flexibility over their payments than Direct Debits allow. The FCA estimated that 5.5 million people have fallen behind or missed payments for domestic bills or credit commitments in the past six months (as of January 2024). The cost-of-living squeeze has contributed to this situation. This is where cVRPs could prove especially useful – in theory.

By leveraging Open Banking technology, cVRPs empower customers with greater visibility, consent, and management of variable payment amounts and schedules, helping to avoid missed payments or financial hardship, while providing merchants with a more reliable and flexible way to collect payments. In short, cVRPs address the limitations of legacy recurring payment systems by putting control firmly in the hands of consumers, improving financial wellbeing and inclusivity.

Unfortunately, if you sift through the mountain of regulatory documents and outputs from all the usual suspects, ranging from the UK government, the Bank of England, the Treasury, the Financial Conduct Authority (FCA), the Payment Systems Regulator (PSR), UK Finance, Open Banking Limited (OBL), to Pay.UK, you might get the distinct impression that there is more written about cVRPs than there are actual working solutions. It’s like attending a book club where everyone talks passionately about the novel, but no one has actually read it yet.

Some VRP background

Let’s start with VRPs for sweeping. Sweeping VRPs are made for managing your own money. They let you move money between your own accounts automatically – great for the financially stable segment of the UK population, which includes individuals who have multiple bank accounts, savings accounts, investment accounts, mortgage accounts, and wish to move their money around appropriately. Think of Sweeping VRPs as ‘me-to-me’ payments. This is where the VRP Open Banking journey began. The UK’s Competition and Markets Authority (CMA) told the nine biggest banks (the CMA9) that they had to offer this service for free. Sweeping VRPs have been live since 2022, and they are working. In July 2025, between 1.1 million and 2.5 million sweeping VRP transactions were recorded – depending on which official statistic you read. The UK’s regulators, including the FCA and PSR, regularly publish reports on Open Banking adoption where sweeping VRPs statistics and growth are often highlighted. These also typically appear in Open Banking Limited’s (OBL) reports, UK Finance publications, PSR strategy updates, and market reviews on their respective websites. Of the Open Banking transactions in July 2025, there were close to 30 million according to the OBL, and around 4% of those were sweeping VRPs.

Next step: commercial VRPs

Commercial VRPs are the next step in this technology, letting you pay businesses for goods and services on a regular basis. The main difference is that you are paying a third party. ‘cVRPs have the potential to offer customers more choice about how they pay and how merchants receive their payments. They will bring more competition into the payments landscape’ – as stated by the JROC. They also identified these VRPs as a test case for premium APIs. Premium APIs refer to a category of advanced, value-added APIs that provide new products and services beyond the basic regulatory Open Banking API requirements – where the data holder can charge for API access. Therefore, the ecosystem has the opportunity to develop a commercial approach to Open Banking that will unlock investment and innovation in a great customer experience. Billers may wish to replace ‘card on file’ transactions with cVRPs because they are expected to be more cost-effective – see the proposed fees later.

The members of UK Finance, including six banks, five fintechs, one scheme, and a wider Engagement Forum, developed a set of proposed standard contractual arrangements which could inform a multi-lateral agreement or bilateral contracts for cVRPs. These will describe different contractual frameworks to enable and govern cVRP participation among Payment Initiation Service Providers (PISPs) and Account Servicing Payment Service Providers (ASPSPs).

UK Finance has also clearly stated that one of its objectives is to drive competition and increase efficiencies by removing some of the transaction costs of bilateral negotiations – and to ensure customers have a consistent experience. The ‘Model Clauses’, as described by the UK Finance, are open source, and their use will be entirely voluntary. That was stated almost 18 months ago, and it probably took at least 12 months to get to that point. Several years in the making and numerous working papers, industry articles, and Model Clauses, but cVRPs are not yet live (as of November 2025) – bearing in mind that non-sweeping VRPs have not been mandated by the CMA, so the CMA9 are not obliged to provide these payment services.

Comparing sweeping and non-sweeping VRPs

Will commercial VRPs be a strong alternative to Direct Debit and a big step forward for the future of payments, though? Commercial VRPs will let consumers pay a company for goods and services while still using the same secure Open Banking technology – initiated and authenticated via the consumer’s banking app. A ‘me-to-business’ transaction riding the Open Banking rails is expected to bring new payment options for both customers and retailers. One potential payment optimisation that merchants and billers may pursue is to replace the ‘card on file’ transaction with cVRPs because of the cost efficiencies that are expected.

Value proposition

The value proposition of commercial Variable Recurring Payments in the UK encompasses three core pillars:

1. convenience, which this article has begun to explore here;
2. security, addressed through the dispute management framework detailed later;
3. cost efficiency, delivering a more economical and streamlined payment solution for businesses and consumers alike.

The cost has not been agreed upon amongst the stakeholders, but what is clear is that the actual pricing will be subject to the growth of cVRPs. If volumes grow faster than projected, then lower prices may be possible in the recovery period (years 6 to 10) compared with the adoption period (years 1 to 5). Payments are a scale business because they have high fixed costs for the sending ASPSPs, the receiving ASPSPs, and the PISPs, but low incremental costs, allowing margins to increase significantly as the volume of transactions grows.

The Frontier Economics paper, published in April 2024 and commissioned by OBL, describes the commerce model for VRPs – wave 1 – which is the initial phase that focuses on low-risk use cases. This initial wave prioritises payments in sectors such as utilities, rail companies, regulated financial firms, e-money institutions, government bodies, and charities, which are considered low-risk sectors. This same document describes a fixed per-transaction fee paid by PISPs to ASPSPs. The fee range considered is between 3 pence (GBP 0.03) and 11 pence (GBP 0.11) per transaction. The range is wide because it depends on the cost recovery timeline. Direct Debit charges for large billers, such as utility companies, are very low, making it difficult for cVRP fees to compete directly with Direct Debit on price. On the other hand, the competitiveness of cVRP fees would be around 6 pence to 8 pence per transaction, which is compared mainly to card payments, not Direct Debit. This assumes the average transaction value is GBP 75 using a debit card.

The most important implication of this market structure is that it is a network. Payers and billers collectively benefit from a greater number of each using and accepting the payment – exactly what the Direct Debit scheme and the card networks have built in the last 50 to 60 years. 

Disputes

Disputes in a sweeping VRP simply do not seem to exist. If a customer sets up a GBP 1,200 monthly transfer from their HSBC savings account, for example, to their HSBC checking account, and they didn’t want to or it was by mistake, there would be no loss of funds. Conversely, a non-sweeping VRP or cVPR moving money to a business will be using a new payment method. Payers need to have a good understanding of this new method of setting up recurring payments, awareness of their rights and responsibilities when paying this way, and knowledge of whom to contact if an issue arises.

Individual firms must ensure they consider the requirements of the Consumer Duty when designing customer journeys and communicating with customers – how consumers will set up the cVRP mandate, confirm the mandate set-up, and provide the appropriate disclosure of information and pre-notification advice. Every bank in the UK will look at this differently and apply distinct customer journeys and various prompts for the consumer – and consider the different operational risk and fraud risks. No standard method has been defined; it will be market-driven. The user experience will vary from one bank to another. 

Onboarding billers (i.e., the merchants) who are operating a legitimate business and selling products for which cVRPs are suitable will not only help promote good payer experiences and reduce the risk of bad actors participating in cVRPs, but also reduce risk and liability for ASPSPs and the PISP. The UK Finance has rightly pointed out that there are no regulatory provisions in place to limit which type of entity a PISP may onboard specifically in relation to cVRPs.

For dispute handling, the VRP working group describes Multilateral Agreements (MLAs). It is suggested that a central data sharing system will be established and managed through the MLAs. All this has yet to be seen in practice.

What is the European perspective on VRPs?

At the narrowest point of the English Channel, the UK and mainland Europe are only 21 miles (or 34 km) apart, but the gap on VRPs could not be bigger. And there are a couple of reasons for that:

• Regulation: as described above, VRPs and the wider Open Banking adoption are very much regulatory-driven in the UK. The CMA required all nine banks to deploy standard APIs in support of VRPs. On the contrary, in the EU, there are country-specific deviations in how the PSD2 is being implemented. Whilst there is an obvious need for APIs, the precise technical specifications are left ‘open’ – consequently, no European API standard has evolved. Whilst the Berlin Group has made progress on standardising Open Finance APIs, standards are being developed at local level, such as the GiroAPI initiative in Germany.
• Value proposition: the advantages to a consumer for using a VRP as opposed to a Direct Debit have been explained before in detail, but there is also a significant difference between the UK and the EU in the usage of credit and debit cards for bill payments. In the UK, it is not a rare occurrence to pay utility bills or subscriptions via debit and credit cards. That provides cVRPs with another use case and an opportunity to replace one payment method with another. It is equally possible to pay a bill by card in the EU, but the default is almost always a Direct Debit. Providing utilities or other merchants with a much cheaper payment method (as opposed to cards) is therefore nowhere near as prevalent as it would be in the EU.
• Marketing and communication: this point cannot be backed up with hard data and is arguably more based on anecdotal evidence, but in our conversations with industry players in the EU the topic of VRPs and cVRPs in particular is not much debated. If anything, EU stakeholders do sometimes worry about the UK’s obsession with VRPs as the Open Banking use case or success story.

So, where does this leave us? Firstly, there is no EU-wide VRP initiative. Any developments will take place at market level. Hence, the most unlikely scenario is that the EU will take the lead on VRPs and achieve considerable transaction volumes. It is more likely that the EU will move forward with its preparations for PSD3 and its local deviations, will continue to support Open Banking as a competitive and innovative payment instrument, but will not treat VRPs as the most prominent use case. It will observe the developments in the UK and learn its lessons accordingly. Whatever those lessons might be.

What about the UK payer?

Overall, payers are customers who want more control, transparency, and convenience for managing payments that may vary in amount or timing, moving beyond the current Direct Debit system that is rigid, yet robust. The adoption of cVRPs is likely to be represented by consumers who prefer Open Banking’s enhanced security and ability to revoke or modify payment mandates easily. This encompasses retail, utilities, financial services, and subscription-based commerce sectors. On paper, it is exciting, and it could transform a 1960s legacy payment infrastructure into one from the 21st century. Many ‘card on file’ transactions could be migrated to a cVRP.

Comparably, the UK Government believes that HS2 (High Speed 2 rail network) will bring a range of benefits to the UK, such as boosting economic growth, improving connectivity, and reducing congestion. Just as HS2 is expected to modernise the UK’s rail network, cVRPs are expected to modernise the UK payments ecosystem, riding on the rails of Open Banking.

The good news is that the price of a cVRP transaction is expected to be less than what the payments industry pays today – unlike the price of an HS2 rail ticket, which is expected to be much more than what consumers currently pay for a rail ticket from London to Birmingham.

About the authors

Mark Beresford is a Director at Edgar, Dunn & Company and has over 25 years of strategic consulting experience in the payments sector. He is responsible for the company’s retailer and hospitality payments practice, working with omnichannel merchants and payment service providers across the globe. 

Volker Schloenvoigt is a Director at Edgar, Dunn & Company based in the London office, and he heads the European Acquiring Practice. Volker has provided consulting advice in payments for over 20 years – and has developed significant experience in digital financial services from working with banks, merchants, card payment schemes, technology vendors, and regulatory bodies in various geographies.

About Edgar, Dunn & Company

Edgar, Dunn & Company (EDC) is an independent global payments consultancy. The company is widely regarded as a trusted adviser, providing a full range of strategy consulting services, expertise, and market insights. EDC’s expertise includes M&A due diligence, legal and regulatory support across the payment ecosystem, fintech, mobile payments, digitalisation of retail and corporate payments, and financial services.