# What VRPs should do to improve the experiences of Open Banking consumers
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-27
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Unlocking the Benefits of Variable Recurring Payments (VRPs)
Meta Description: Discover how VRPs can revolutionise financial services and SME interactions, offering consumers greater control and personalised experiences in the Open
URL: https://financedigest.com/what-vrps-should-do-to-improve-the-experiences-of-open-banking-consumershtml

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_![Luke Ladyman, COO and Co-founder of Cheddar](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/203-1736815144502-compressed.jpg)_

_By_ **_Luke Ladyman,_** _COO and Co-founder of_ [_Cheddar_](https://www.cheddar.me/)

Variable Recurring Payments (VRPs) are an exciting topic of conversation within Open Banking. Though relatively unknown outside of the financial marketplace, VRPs are at the centre of a new form of open banking-enabled technology.

They are a type of payment instruction that is set up and used to make a series of recurring payments. This technology is poised to make life easier for individual consumers and small to medium-sized enterprises (SMEs), however it’s not quite hitting the mark just yet.

**Limitations**

VRPs have the potential to do far more than just simplify recurring payments but unfortunately, the efficacy of VRPs is severely limited. As they stand, VRPs are only mandated for ‘sweeping’, which is a word to describe moving [money from an individual’s current account to their savings](https://www.financedigest.com/how-to-save-money-for-a-car.html "How to save money for a car").

[According to the OBIE, five million people now use Open Banking in the UK](https://www.openbanking.org.uk/news/5-million-users-open-banking-growth-unpacked/). We can expect [consumers to demand greater scope in VRP services](https://www.financedigest.com/do-consumers-want-robo-advisory-services.html "DO CONSUMERS WANT ROBO-ADVISORY SERVICES?"), but the infrastructure to support VRP [technology](https://www.financedigest.com/kelda-technology-pushes-ahead-with-global-growth-plans-afternew-appointment.html) is just simply lacking.

The next major step in expanding the scope of this [technology](https://www.financedigest.com/kelda-technology-pushes-ahead-with-global-growth-plans-afternew-appointment.html) will be when legacy [financial institutions](https://www.financedigest.com/what-the-future-holds-for-financial-institutions-in-2023.html "What the Future Holds For Financial Institutions in 2023") collectively adopt and build out VRP infrastructure. At present, only a small handful of legacy [banks offer VRP services to their customers](https://www.financedigest.com/communicating-with-the-customer-is-the-future-of-mobile-banking.html "Communicating with the customer is the future of mobile banking") which has severely limited its reach.

**[Unlocking the benefits](https://www.financedigest.com/unlocking-the-code-how-to-benefit-from-low-code-platforms.html "Unlocking the code – How to benefit from low code platforms") of VRP technology**

VRPs promise to unlock countless opportunities for consumers to better manage their finances, whilst simultaneously supporting companies to build out mechanisms that allow for [open banking](https://www.financedigest.com/open-data-represents-the-biggest-challenge-to-banks-in-a-generation.html "Open data represents the biggest challenge to banks in a generation") adoption. This [technology](https://www.financedigest.com/kelda-technology-pushes-ahead-with-global-growth-plans-afternew-appointment.html) has the potential to completely transform how [consumers interact with financial services](https://www.financedigest.com/30-per-cent-of-uk-consumers-would-use-amazon-google-facebook-or-apple-for-banking-services.html "30 Per Cent of UK Consumers Would Use Amazon, Google, Facebook or Apple for Banking Services") and SMEs.

If mandated for more than just the sweeping use case, VRPs can give consumers complete control over their monthly subscription [payments for things such as mobile](https://www.financedigest.com/what-is-the-optimum-mobile-payment-mix.html "What is the optimum mobile payment mix?") top-ups or gym memberships. [Consumers may even set](https://www.financedigest.com/factbox-how-far-are-uk-energy-bills-set-to-rise-and-what-help-are-consumers-getting.html "Factbox-How far are UK energy bills set to rise and what help are consumers getting?") up VRPs with taxi services to automatically charge them whenever they arrive at a destination up to a certain amount.

By expanding the scope of VRPs, consumers can enjoy hyper-personalised Open [Banking experiences](https://www.financedigest.com/transforming-the-banking-experience-to-be-mobile-first-and-people-centric.html "Transforming the banking experience to be mobile-first and people-centric"). And as Gen Z enters the workforce, this tailored approach will be more important than ever before. [Setting payment parameters which are as easy to enforce as clicking a button will keep Gen Z happy and will give businesses](https://www.financedigest.com/how-to-set-up-your-first-ever-business-without-the-stress.html "How to set up your first-ever business (without the stress)") access to an entirely new demographic.

**[Cost of living](https://www.financedigest.com/five-cost-of-living-trends-expected-in-2023.html "Five cost of living trends expected in 2023") crisis**

With living expenses reaching record highs for [young people](https://www.financedigest.com/banks-need-to-digitise-financial-wellbeing-support-to-help-young-people-manage-through-this-recession.html "Banks need to digitise financial wellbeing support to help young people manage through this recession") and working families, paying for basic utilities has become a lot more painful. At their full potential, VRPs could enable the most vulnerable in society to authorise utility providers to automatically take payments, only up to a certain amount. This would help consumers budget better for [emergencies and keep up with payments](https://www.financedigest.com/digital-payments-an-explosion-of-emerging-opportunities.html "Digital Payments: An Explosion of Emerging Opportunities").

To further cushion the effects of the crisis, consumers could also specify payment parameters to avoid any shocks to their [bank accounts](https://www.financedigest.com/are-banks-ready-for-the-new-accountability-regime-in-2016.html "ARE BANKS READY FOR THE NEW ACCOUNTABILITY REGIME IN 2016?"). This will generally lead to less errors as [data is processed](https://www.financedigest.com/reckon-introduces-link-to-bank-data-to-help-small-businesses-streamline-the-reconciliation-process.html "Reckon introduces link to bank data to help small businesses streamline the reconciliation process ") digitally and won’t require manual entry.

Lastly, those struggling [financially will be able to automatically withdraw their consent to payments service](https://www.financedigest.com/devops-the-secret-tool-thats-transforming-financial-services.html "DevOps: The Secret Tool that’s Transforming Financial Services") providers (PISPs) who make the payments on their behalf. This is in contrast to credit or [debit cards](https://www.financedigest.com/visa-has-terminated-global-debit-card-agreements-with-ftx.html "Visa has terminated global debit card agreements with FTX") where consumers do not have the flexibility to automatically opt-out of transactions and cannot set specific parameters for payments.

**What this** [means for banks](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back")

On the surface, the value proposition of VRPs looks to threaten certain aspects of [banks’ business](https://www.financedigest.com/credit-agricole-launches-china-ma-and-investment-banking-business.html "Credit Agricole launches China M&A and investment banking business") models. However, once you look deeper, we can see this isn’t the case – it’s actually [quite the opposite](https://www.financedigest.com/nothing-cryptic-about-new-crypto-start-up-quite-the-opposite.html "Nothing cryptic about new crypto start-up – quite the opposite           ").

If adopted for all use cases, VRPs can help [banks significantly combat fraud as no sensitive payment](https://www.financedigest.com/5-ways-banks-can-compete-in-payments.html "5 ways banks can compete in payments") information is exchanged with businesses. VRPs can act as a frontline defence with its enhanced transparency and tight controls for the consumer. PISPs can create the same experiences you get by using your debit or [credit card but with the additional benefits](https://www.financedigest.com/benefits-of-a-good-credit-score.html "Benefits of a good credit score").

By effectively addressing security concerns, [banks will greatly improve](https://www.financedigest.com/improving-reputation-in-the-banking-sector-through-marketing-communications.html "IMPROVING REPUTATION IN THE BANKING SECTOR THROUGH MARKETING COMMUNICATIONS") customer experiences and reduce customer drop-off rates.

**The future of VRPs**

Taking into [account the current](https://www.financedigest.com/euro-zone-current-account-deficit-widens-again-on-large-energy-bill.html "Euro zone current account deficit widens again on large energy bill") limitations of this technology, the future of VRPs rests on increased licensing approval from the Financial Conduct Authority (FCA) and further approval from the Competition and Markets Authority (CMA).

This technology, if utilised effectively, can be [applied across a spectrum of uses to give consumers](https://www.financedigest.com/50-of-consumers-wont-spend-more-than-20-minutes-applying-for-financial-products-online.html "50% of consumers won’t spend more than 20 minutes applying for financial products online") greater control of their finances as originally promised. There’s no doubt that expanding the scope of VRPs will give consumers hyper-personalised Open [Banking experiences](https://www.financedigest.com/the-rise-of-virtual-agents-the-future-banking-experience.html "The rise of virtual agents: the future banking experience") that will decrease customer drop-off rates. So, definitely watch this space!


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