Commercial Variable Recurring Payments (CVRPs) are for many the true catalyst for Open Banking services and the payments industry is poised for their take-off.
Benefits are perceived from all players – from greater control and transparency for customers, to lower processing costs for merchants and top level security and efficiency for PSPs and TPPs.
Token.io, which provides such infrastructure to large multinational banks, most recently Santander UK, says VRPs are the first real test case for premium APIs in the UK, going beyond functionality required by PSD2 in exchange for commercial compensation to the banks offering them.
Considerable Attention On CRVPs
At the Open Banking Expo, London October 2024, considerable attention was drawn to CRVPs.
Open Banking Limited, the force behind the event, produces an annual survey on VRPs and the future of payments together with Token.io and the key metrics were shared on the day.
According to the survey, bank buy-in is needed to push the adoption curve upwards among merchants, and a key finding states that merchants want to see 70% of UK consumer accounts supporting CVRPs before they could commit and adopt themselves.
Equally, 79% of banks believe Commercial Variable Recurring Payments will be beneficial to the overall UK payments ecosystem, as well as the majority believing that CRVP will provide benefits to their customers.
Regulatory Push Required
There is general consensus that a regulatory push will be required to unlock the potential of CRVPs, as it has with other A2A schemes.
As Nilixia Devlukia, Chair, Open Finance Association says, “It is time for the regulators to move us out of the holding pattern we are seeing in the VRP pilot roll out and accelerate their decision-making.”
75% of respondents agreed regulatory intervention is likely required to propel CVRP to its destiny, with DRP at 78% agreement.
Happy news, then, that 63% of banks surveyed plan to participate in the SEPA Payment Account Access (SPAA) scheme, which is a set of rules, practices and standards developed by the European Payments Council (EPC) to provide a basis for so-called premium APIs.
There is also a strategic pilot planned in 2025 for SPAA, in which 50% of surveyed banks said they would participate.
For those uninterested…
For those uninterested, reasons given were a lack of attractive commercial model, other premium API initiatives, other payments priorities and uncertainty about wider regulatory developments in payments.
Bank coverage, commercials and consumer protection are where regulatory direction is specifically needed in order to unlock merchant adoption, according to Token.
64% of respondents feel fee structures should be standardised and capped.
With 57% of merchants willing to pay payment providers 0-10 basis points (bps) per transaction, and a further 29% 11-20 bps, the future looks fairly rosy.
And for banks, in order to be competitive with debit cards, the majority (32%) says 3-5 bps would suffice.
Speaking with Todd Clyde, Token CEO, at Open Banking Expo, he said while there hadn’t been a hockey stick adoption curve yet for this initiative, the “TfL moment” is imminent.
Having just announced the partnership with Santander UK, whatever about capturing 70% of the customer account market, they’re “playing for 100%”.
Subscription payments are the top use case, according to respondents, at 68%, followed by utility bill payments and 1-click e-commerce payments.
Other consumer benefits compared to direct debits, as Charlotte Wise, Commercial Director, American Express sees it, are reduction in late or missed payments, access to offers and incentives for longer term commitments, all manifesting for merchants in new customer acquisition and stronger retention.
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