Why Open Banking matters

Open banking allows consumers to securely share their banking data with third parties who can offer a range of services, including money management and initiating payments. It is an increasing choice for consumers, as well as boosting growth and innovation.

Variable Recurring Payments (VRPs)

A VRP is a payment instruction that lets customers safely connect authorised payment providers to their bank account to make payments on their behalf in line with agreed limits, for example, switching funds between banks, your own bank accounts (“me-to-me” payments). 

“Commercial” Variable Recurring Payments (cVRPs) look to build on this and enable the facilitation of other payments. For example, it could allow a consumer to pay the exact amount on their electricity bill each month, rather than a pre-nominated amount.

cVRPs are critical as they are regarded as a key use case for further unlocking the benefits of Open Banking.

The need for a commercial model for Open Banking payments

Delivering a sustainable commercial model for Open Banking payments has been a long-term goal for UK Finance. There needs to be incentives for all bank and fintech market participants in the payment chain, and merchants and customers. The National Payments Vision set out the importance of a sustainable commercial model for Open Banking.

UK Finance’s role

There are 2 “waves” of cVRP development. Open Banking Limited has proposed a commercial model for wave 1 use cases (low-risk use cases, including payments to regulated financial services, regulated utilities sectors, and to local and central government).

UK Finance, supported by Deloitte, is proposing a commercial model for ‘Wave 2 cVRPs and beyond’, namely, cVRPs for e-commerce use cases. These uses case could generate a significant volume of payments.

Scope of the UK Finance report

The National Payments Vision set an objective for the model put competitive downward pressure on payment costs for merchants. Our proposal balances driving adoption by merchants,  rewarding firms and allow for customer protection. The three main parts of the proposal are:

1. Dimensions of the commercial model, including the fee structure;
2. Purchase protection options
3. Model outcomes showing how core assumptions impact the level of the transaction fee

What next?

The proposal has been developed with expert technical support and informed by engagement with industry participants, merchants, and other stakeholders.

However, it's critical note that it is not for UK Finance to decide the potential transaction fee levels for cVRP.

cVRP is an exciting payment product, and a landscape of market participants is developing to make it available to businesses and consumers. At the end of last year, UK Payments Initiative Ltd incorporated. We have shared the report with them as an input into their decisions on the Wave 2 cVRP commercial model. Other operators and/or stakeholders will consider it too.

2026 will be an exciting year for open banking and one in which we will see the first cVRP transactions. UK Finance is pleased to have worked with members and other stakeholders to support a milestone development in open banking.

This report, and the work undertaken in its preparation, are to facilitate discussion only, and further work will be needed to address legal risks associated with potential options and proposals.