Variable Recurring Payments, or VRPs, are taking the payments world by storm as they provide a similar result to Direct Debits, but at a lower cost, less risk of fraud, and offer a better experience. But what are Commercial VRPs and why are they the next big thing in payment innovation?
We’ve tended to be more familiar with sweeping VRPs, otherwise known as ‘me-to-me’ payments where money can automatically move between our own bank accounts. Rather than payments going through traditional rails, they use an API, such as Yapily, to bypass fees and settle quicker in the receiver’s account. Popular uses are to prevent an account going into an overdraft or for personal investment apps.
New to Variable Recurring Payments? Read our introductory article to find out more and what our clients are saying.
What are Commercial VRPs?
Let’s familiarise ourselves with Commercial VRPs (CVRP), sometimes called non-sweeping or premium VRPs, or Dynamic Recurring Payments, as this promises to be the next big thing in automated payments.
This time it’s ‘me-to-business’ where the money is moving money to a third-party account and to pay a business, rather than to our own account. It aims to transform the way we pay merchants and businesses for their goods or services, whether it’s our favourite online store, or our streaming service to watch movies. The four parties involved in the Commercial VRP are; the customer, the third-party provider (Yapily), the merchant, and the customer’s bank which executes the payment.
Commercial VRPs, or Dynamic Recurring Payments, are currently not yet mandated by the Open Banking Implementation Entity (OBIE) by the CMA. However, with sufficient development and adoption, it could replace card-on-file and direct debit payments.
The benefits of Commercial VRPs
Just like sweeping VRPs, Commercial VRPs bring numerous benefits to both businesses and consumers:
- Payments are protected with Strong Customer Authentication (SCA) ensuring they reduce risk and keep users safe.
- As the open banking provider, Yapily populates the customer’s payment details to act as another anti-fraud measure so customers do not send their funds to a scammer’s account.
- Traditional fees are removed, saving costs to the merchants.
- Payments arrive faster for a streamlined experience and less hassle tracking down transactions.
- The user can have total control with frequency, amount, and must provide their consent in order for the payment to be set up.
See a commercial variable recurring payment tutorial here from request to authorisation!
The advantages of Commercial VRPs over Direct Debit or Card-on-File
Recurring payments using direct debit have been popular due to their convenience for memberships and paying bills. However, they can leave us vulnerable to risk and lack flexible parameters for us to take control by making amends to the payment. There’s also often delays with set-up and for payments to land which can cause friction for both the consumer and the merchant.
Another popular alternative is card-on-file for e-commerce payments or subscription services, but similar issues occur with slow settlement times, as well as disruptions when new cards are issued, or risks of having card details stored.
With commercial VRP, it becomes to ‘account on file’. Customers can benefit from greater control, increased transparency, and a safer payment where they can use biometrics like Face ID or fingerprint to securely confirm the transaction.
This new A2A payment capability looks to make paying as seamless as possible, with one-click payments for your next online shop, paying for subscription services, paying your bills, cashless stores, and transferring to your investment pots.
Use cases of Commercial VRPs
Let’s look at the potential of Commercial VRP, or Dynamic Recurring Payments, in action with the multiple use cases that could take shape.
Firstly, e-commerce payments to your favourite merchant or delivery service are easier than ever before. With a simple one-time only setup to securely verify your bank account, regular payments evolve into a one-click checkout experience. A better user experience for customers, and a low-cost alternative for merchants that’s fast and convenient.
For e-commerce businesses, commercial VRP offers a streamlined payment experience with one-click payments. Replacing the traditional card-on-file, businesses can get paid faster with a simplified checkout, keeping customers coming back for more.
Secondly, paying bills. Direct debit payments are often used for paying bills to ensure the money lands in the account on time, but with CVRP, there’s greater peace of mind that the funds arrive securely. Options can be created for paying bills based on usage, offering greater flexibility for both business and consumer.
With the rise of subscription services, whether it’s streaming or gym memberships, CVRP will provide an alternative to card-on-file payments or direct debits. Without the risk of sensitive data being hacked, or payments being intercepted by multiple intermediaries, there’s just a simple transfer.
Feeling charitable? Securely send your monthly donation with no hassle or headache when you use Commercial VRP. Plus, your total donation amount will land in the charity’s account as no cut is taken with fees.
Getting started with Commercial VRPs
So what’s next in the realm of commercial VRP? Yapily is dedicated to remaining at the forefront of open banking innovation, and commercial VRP is no exception.
Discover more about Yapily being the first open banking payments provider to make Commercial VRP a reality alongside Ant Group and Hungry Panda!
Get your business equipped with Variable Recurring Payments today to start maximising your efficiency and revenue. Get the more technical insights on our Yapily Docs hub where you’ll get insights into coverage, plus handy tutorials that make getting started with VRPs even easier.
Interested to find out how open banking can save your business time and cut costs, while ensuring the utmost security? Speak to one of our open banking experts today.