JROC signals desire to move at pace on commercial VRP

The Joint Regulatory Oversight Committee (JROC) has published ambitious plans to pilot consumer-to-business Variable Recurring Payments (VRP) under a commercial API model – a move that will see Open Banking move closer to truly rivalling the card networks, delivering much-needed choice to UK consumers.

This major development will bring the instancy, security and cost-effectiveness of Open Banking payments to the heart of our digital economy.

Key observations on this initiative include:

JROC has signalled a desire to move at pace
The Payment Systems Regulator (PSR) believes the best way to deliver a VRP pilot is through a multilateral agreement, operated by Pay.UK, which specifies the required functionality, and arrangements for pricing, dispute resolution and liability.

A successful pilot requires strong market participation
A sufficiently large number of consumers need bank accounts capable of supporting VRP, hence the PSR propose to mandate the involvement of the CMA9, which includes Barclays, HSBC, Lloyds Banking Group, Nationwide Building Society, NatWest and Santander. This would deliver 90% coverage of customer accounts.

The PSR is serious about encouraging fintech investment in VRP
The PSR has proposed a cost-recovery model for the pilot, which would remove Faster Payments charges from ‘sending banks’ and prevent them charging payment initiation service providers.

A laser focus will be needed to deliver the pilot on time
We welcome the PSR’s clear aim to launch the VRP pilot by Q3 2024. This is a rightly aggressive timetable. It will require open, active and balanced engagement by Pay.UK with the Open Banking ecosystem, with strong oversight from JROC.

We need to bring VRPs to ecommerce
VRPs will give consumers the ability to initiate recurring payments of varying amounts, directly from their own bank account to the bank account of their service provider, within predefined limits and time periods they control. The pilot will initially focus on enabling consumers to make VRPs to financial services firms, utilities and government, given existing consumer protections in these areas. We should look to extend VRPs to ecommerce use cases without delay.

We look forward to working closely with the PSR, Pay.UK and industry colleagues to make the pilot a success.

Read the JROC update, and the PSR’s call for evidence on expanding VRPs, here.