UK regulators have confirmed a temporary easing of competition scrutiny on commercial Variable Recurring Payment (cVRP) pricing. In this blog, Paylume’s Jimmie Franklin and Lauren Jones explore how this move could accelerate the shift from open banking as an obligation to open banking as infrastructure.
On January 20th, the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR), confirmed that they will grant a temporary reprieve into investigating the UK Payment Initiative’s pricing model for cVRP, following consultation with the Competition and Markets Authority.
This allows the newly launched consortium to continue developing its cVRP product without any economic-related barriers.
The regulators emphasised that this is a temporary measure, valid until the government’s legislative framework is implemented, which is expected sometime between the end of this year and July 2027.
The ambition behind cVRP is to support innovation, lower costs for businesses, and give consumers more control over payments.
But what are Variable Recurring Payments?
VRPs enable customers to give permission to a third-party provider (TPP) to make a series of payments from their bank account at variable amounts and intervals with only one strong customer authentication (SCA) step when setting it up.
It was previously only possible for TPPs to initiate a single, one‑off payment, with the consumer needing to complete an SCA step for each subsequent payment. For monthly bill payments this is a heavy burden for the consumer.
In practice, VRPs will work in a similar way to direct debits and card-on-file payments in that businesses will be able to easily collect payments from their customers on a recurring basis. This will allow VRPs to compete with or complement other existing payment types.
Commercial VRPs refer to those that go beyond sweeping, or me-to-me, payments.
Why does there need to be a centralised commercial model to support VRPs?
It has been nearly four years since Natwest made the UK’s first-ever non-sweeping VRP. Announcements were made that the bank had signed agreements with GoCardless, TrueLayer, Token, Tink (acquired by Visa), Yapily and Crezco to begin offering VRPs as a new payment option for businesses and consumers.
However, no real progress has been made in that time towards widespread market adoption.
Advocates of VRP state that an industry-agreed commercial model is needed to create incentives for banks and fintechs to invest, innovate, and ensure fair pricing.
VRPs also come with additional costs compared to one-time open banking payments – a cost that those proponents believe need to be set industry-wide. Even if UK banks eventually get behind VRPs, it won’t necessarily result in an innovative payment method unless banks are incentivised to improve their user experiences in line with these new workflows.
cVRP positioned as the UK’s next major payment rail
The statement by the FCA and PSR comes after UK Finance unveiled a proposal for cVRPs in e-commerce earlier this month, and an FCA letter to trade associations in December 2025 regarding next steps for establishing a Future Entity to oversee UK open banking.
The FCA’s letter signals that live VRP transactions are expected in 2026 and also highlights the regulator’s expanded powers under the Data (Use and Access) Act 2025.
The new law gives the FCA a statutory role in overseeing smart data schemes, allowing it to mandate data‑sharing rules, set technical and security standards, and supervise the new Future Entity.
For years, open banking policy was built on mandated access and the belief that competition alone would be able to deliver innovation. This initial phase delivered real progress, but as the UK moves into its next chapter, the foundational commercial model has always been an inhibitor to continued growth. For the UK to continue to be a leader in open banking, this crucial deadlock needs to be overcome and the announcement by the FCA and PSR is a lifeline for the market.
By tolerating a centralised fee model, regulators are acknowledging a simple truth, that open banking cannot scale if commercialisation is not part of that. Historically, a fear of competition law made banks reluctant to agree on pricing.
cVRP are not being treated as another optional use case and are being positioned as a core payment rail, heralding more consumer control, lower merchant costs, and a credible account-to-account alternative to card schemes.
Sustainable economic model as a precursor for growth
A common theme in open banking initiatives around the world is how to develop a sustainable commercial model that allows all participants, inclusive of banks, fintechs and third‑party providers, to generate ongoing revenue from open banking services without relying on regulatory arbitrage or prohibitive cost structures.
Typically, in other markets there are three broad approaches to this:
- Fees and terms are agreed among participants and overseen by the regulator, such as in Brazil.
- Fees are allowed and decided on by individual institutions but must be approved by the regulator, such in Mexico
- Fees are decided upon purely bilaterally, such as in Hong Kong.
The UK approach is relatively unique. Permitting a cautious commencement of an industrial commercial model but tied to a very specific use case, cVRP. It remains unclear what the future, broader commercial model for open banking 2.0 would look like, with enhanced data sets beyond payment account data.
What does it mean for banks?
It is not just the FCA and PSR that are driving cVRP. The UK National Payments Vision (a strategic government document setting a long-term direction for the payments ecosystem) explicitly mentions developing a sustainable commercial model for open banking payments, especially VRPs.
Given this wider context, cVRPs are highly likely to become a competitive payment option in due course.
For established banks, determining whether to enter the VRP market is a critical decision.
To be able to offer compelling VRP services that can be monetised, banks will need significant capabilities, such as VRP channel components that integrate into the merchant’s front-end channels; operational processes for handling payment errors, declines and disputes; as well as enhanced consent and authentication techniques.
Like any new product development, this will require significant investment. However, the rewards could be plenty.
Now is the opportune moment for banks to establish their readiness in this space and commit to building the capabilities that are necessary to compete in the rapidly emerging VRP market.
