Melek Pirgon, Chief Product Officer at Modulr, explains commercial Variable Recurring Payments (cVRP) and how they impact the UK payments industry.
Recurring payments have long been a cornerstone of the UK's payments landscape. Businesses collecting bills, loan repayments, subscriptions, membership fees, and other regular payments depend on reliable, scalable, and easy-to-use systems.
For many years, Direct Debit was the default choice for these collections. While it’s still a widely used payment method and an important part of how businesses move money, the payments market continues to evolve.
Alongside Direct Debit, Open Banking has grown to over 32 million one-off payments a month. The rollout of commercial Variable Recurring Payments (cVRP), a new Open Banking payment method recently launched through the UK Payments Initiative (UKPI), is the latest payments development in the UK.
What is cVRP?
CVRP allows businesses in specific sectors to regularly collect varying amounts from a customer's account, following a single customer authorisation.
The defining feature of cVRP is informed customer consent: a business requests access and the customer grants it once, defining a maximum payment amount, frequency, and duration (e.g., up to GBP 500 per month for a year). Once consent is given, businesses can use the initial customer authorisation to collect within the pre-set parameters without requiring re-authorisation for each transaction. Payment is in real-time, and customers can view, amend, or retrieve their consent at any time.
What’s the difference between cVRP and other recurring payment methods?
Reiterating the above, with cVRP, customers grant an initial consent that allows future payments collection without repeated approval requests. The pulled amounts can vary over time (within the agreed parameters), providing flexibility for use cases where payment values are not fixed.
Each cVRP transaction settles through Faster Payments. Reconciliation processes can be simplified when payment information is immediately available in the collection lifecycle. This ability to combine recurring payment functionality with real-time account-to-account (A2A) payments infrastructure is one of the reasons cVRPs are gaining industry attention.
Why is cVRP now important for recurring payments?
In the face of economic uncertainty, the introduction of cVRP offers businesses collecting payments at scale an opportunity to evaluate their payment infrastructure. Recurring payment collection is generally considered a back-office process, but for organisations handling significant payment volumes, the effectiveness of collections can directly impact strategic growth.
Customer expectations continue changing: they have become accustomed to digital experiences with greater visibility and control. Businesses are seeking payment methods that address these expectations while simultaneously maintaining widespread efficiency.
This environment has increased the demand for payment alternatives that can be implemented quickly and that complement existing collection approaches.
Which businesses could benefit most from cVRP?
Designed to support recurring payments, cVRP could benefit businesses where collection amounts might change over time. For example, utility providers often need to collect different amounts, as household energy or water usage changes throughout the year, and bills can vary monthly.
Another cVRP use case is for lenders, who may collect varying repayment amounts over the span of a loan, and for earned wage access providers, who must allow different repayment amounts, depending on how and when payments advances are needed. In each case, payment values are not fixed, so the ability to vary each collection is relevant.
As cVRP is adopted and business and consumer knowledge increases, more use cases will appear, along with broader adoption wherever businesses manage variable collections.
Is cVRP replacing Direct Debit?
The payments industry has historically evolved by adding new payment options for specific needs and use cases. Established methods continue to be important even with these newer alternatives.
Direct Debit remains deeply embedded within the UK's payments ecosystem, serving many businesses effectively. The launch of cVRP only adds to the options available for organisations designing collection strategies.
Different payment methods offer different capabilities, and businesses ultimately need to determine which approaches best suit their customers, growth plans, and operational requirements. For some, this will mean a hybrid model: adopting cVRP for specific use cases, while carrying on using existing payment collection methods elsewhere.
A look ahead at the expectations for cVRP
The launch of cVRP is quite a milestone for UK Open Banking and its long-term impact depends on how businesses, customers, and the wider payments ecosystem choose to use it. It’s already clear that now, when organisations seek flexibility, accuracy, and control, cVRP is an additional capability to the recurring payments toolkit.
This article is part of The Paypers’ Explainers section. To access other educational materials from this section, click here. If you have suggestions about other topics that could be included in this section, we invite you to write to us at editor@thepaypers.com.
About the author
Melek Pirgon is Chief Product Officer at Modulr, a leading payments automation platform. She began her fintech career at Starling Bank before joining Modulr in 2019, where she leads product strategy and development as the business scales across the UK, Europe, and the US.
