The UK’s Payment Systems Regulator (PSR) plans to evaluate the need and scope of mandated participation in the Phase 1 expansion of Variable Recurring Payments (VRPs) following feedback from stakeholders.
VRPs allow customers to authorize registered payment service providers to initiate ongoing payments from their bank accounts, with the timing or amount varying within agreed limits. Last year, financial regulators approved plans for a Phase 1 rollout of non-sweeping VRPs by the third quarter of 2024. The initial focus will be on payments to regulated utilities, financial services, and central and local government, laying the groundwork for broader applications of VRP and open banking payments.
Stakeholder feedback on these plans has been published, indicating several areas for potential adjustment:
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Mandated Participation: There is support for some level of mandated participation beyond the large lenders (CMA9). While the PSR agrees with this sentiment, it emphasizes that a substantial number of consumer accounts supporting VRPs is essential for the success of Phase 1. The regulator will continue to evaluate the necessity and scope of mandated participation.
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Coordinating Expansion through Multilateral Agreement (MLA): Stakeholders expressed support for better coordination, although there were concerns regarding the need for an MLA and whether it should involve a central pricing structure. The PSR believes that an MLA could be an effective means of managing relationships between sending firms and payment initiation service providers. They will collaborate with the VRP implementation group to define specific rules for the MLA and identify suitable operators.
- Pricing Principles and Possible Price Intervention: Many respondents showed support for some form of central pricing, though opinions varied on the best pricing model for API access to VRPs in Phase 1. The PSR will assess different pricing strategies.
The regulator is set to present updated proposals in the autumn for further stakeholder input.
Kate Fitzgerald, head of policy at the PSR, stated, “This is an important step in maintaining momentum to expand the use of VRPs. We’ll continue to work closely with the ecosystem to ensure this happens effectively and identify where regulation can have the most significant impact—promoting competition and driving better value and outcomes for consumers.”