What consumer protection is in place for Commercial Variable Recurring Payments?

Discover how Variable Recurring Payments (VRPs) are poised to transform consumer transactions with enhanced security and control. Learn about consumer protections and the future of VRP regulations in our comprehensive guide.

Variable Recurring Payments (VRPs) are proving to be the next big thing when it comes to open banking payments. With its greater security offering, better user experience, and more control for the consumer, and faster checkout, lower cost, and greater reliability for businesses.

Commercial VRPs, or ‘me-to-business’ payments are set to be an alternate payment method to card-on-file for easy payments to your favourite e-commerce merchants. But with a new form of payment that looks to shake up Direct Debits and card-on-file, comes questions… What is the protection for the consumer?

Unfamiliar with VRPs? Get up to speed with our introductory guide!

What are the barriers preventing Commercial VRP adoption?

Currently Commercial VRP not yet being widely adopted by UK and EU banks. There needs to be greater market availability for commercial VRP to be adopted by merchants and banks alike, in order to embrace a new and innovative way to pay.

Sweeping VRPs are readily available for banks and businesses to introduce and for their consumers to reap the benefits, as we’ve seen with Pleo who offered sweeping VRPs for simple and seamless wallet top-ups.

What protection is there for consumers with VRPs?

There are several issues which could arise with payments, from the wrong amount taken, delays, defective goods provided, or fraud. It’s important to fully comprehend what measures are in place to protect consumers.

Existing consumer protection is already in place when you consider ATOL, CCR, CRA, and ABTA. With VRPs, consumers are still protected under the Consumer Rights Act that entitles them to full refunds upon return of goods. With sectors like travel, should the airline go under, as an example, flyers are entitled to the full refund.

One of the primary benefits of open banking is the integration of Strong Customer Authentication (SCA) which enables safer payments. This allows for fewer intermediaries and touchpoints that can leave both businesses and consumers vulnerable to fraud and data being hacked.

Should an issue with the variable recurring payment arise, regulated industries will often have a dispute management process already in place for both the merchants and the bank. The existing refund capabilities they will already have in place means a standardised process to offer a better payment experience for consumers.

So why choose Commercial VRPs?

Let’s take a closer look at some of the numerous benefits of Commercial VRPs over more traditional payment methods:

  • Unlike card-on-file payments, a popular method for paying for services, there are no credit card details stored, just the account.
  • Consumers have greater control over their payments, unlike direct debits, which are often locked in with fixed times or amounts.
  • As the consumer must authorise the payment, it enables the customer to have greater control over the payment, as opposed to just leaving their account, and has heightened security with fewer intermediaries as the money travels to the merchant’s account.
  • VRPs are part of open banking’s Faster Payments Scheme, meaning there is near real-time settlement of the funds. Compare VRPs with Direct Debits.

Recurring payments will be readily available to review and approve via the consumer’s online banking platform, enabling easy approval and cancellation of VRPs.

What’s the outlook for improved regulation

The benefits and use cases of Commercial VRPs look to be astounding by the fact that it can rival such familiar methods such as Direct Debit and card-on-file, while offering greater control and security for the customer. It would seem bringing this to the masses would be imminent. However, while this mainstream adoption is preferable, there are numerous steps in place by regulatory bodies to ensure this is done with the necessary measures in place.

The Joint Regulatory Oversight Committee (JROC), which is co-chaired by the Financial Conduct Authority (FCA) and the Payments Systems Regulator (PSR), have developed a working group focused on expanding the rollout of Commercial VRPs. Phase 1 is set to commence in Q3 of this year, with the focus beginning with lower-risk industries, such as regulated financial services and utility companies.

In the meantime, policy proposals will be developed further and an updated set of pricing principles will be published. These advancements will further support the increased adoption of open banking, with rolling proof points of where industries have found greater conversion rate, better user experience, and lower costs. All with open banking.

We discussed the impact Commercial VRP will have on our recent webinar. Watch on demand to better understand what’s happening with policy developments and why your business, and your customers, stay protected.

Your future with VRPs

So, ready to start offering the secure and seamless payment option for your customers? We are on-hand to get your business integrating sweeping VRPs today! Speak to one of our open banking experts about how we can help you.

At Yapily, we’re always at the forefront of innovation, from the breadth of our coverage, to the innovation our solutions can bring. So keep your eyes peeled for the latest news on Commercial VRP and when we can get your business started with this exciting payment experience.

Yapily was the first to launch Commercial VRP in the UK! Find out more about our exciting CVRP launch with Ant Group and Hungry Panda.


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