Interest in open banking is growing — and fintech providers are now offering open banking-powered Variable Recurring Payments (VRP), giving the direct debit of 50 years ago a makeover.
Open banking is continuing to forge new frontiers in the payments landscape, says Fliss Berridge, Co-founder of open banking payments fintech, Ordo.
Providers are now expanding their services to provide a Variable Recurring Payments (VRP) facility which will be a fast and low-cost way for businesses to collect regular payments from their customers.
VRP setup takes minutes, and
money transfer is immediate.
Account-to-account payments are good for business
Increasingly, users of open banking account-to-account payment services are recognising that it can save them time and money. “If a customer pays using a card, for example, it takes days for the money to arrive with the supplier — and with a hefty card fee deducted,” says Fliss.
With open banking, money is transferred between accounts in real-time, in full; and with automatically correctly referenced payments, reconciliation is easy. It’s safer than cards and bank transfers and is easy to set up and use. For example, Ordo’s fully hosted and managed white-labelled services are ‘plug and play’ — no tech build or screen journey design needed, just savings from day one.
How Variable Recurring Payments will transform banking
VRPs are a fast and low-cost method of collecting regular payments that could provide an alternative to direct debits. Direct debit setup takes weeks, but VRP setup takes minutes, and money transfer is immediate.
“The first use case for VRP — sweeping — is live now and offers me-to-me payments” Fliss explains. “This means customers can ‘sweep’ money between their accounts. It requires a one-time setup, where you specify frequency and amounts, then, repeated payments are swept automatically between current and savings accounts or to repay a loan, for example. It’s secure, convenient and frictionless.”
The first use case for VRP — sweeping — is live now and offers me-to-me payments.
The further evolution of VRP in 2023 will enable people to pay all their bills using VRP. Businesses will be able to use VRPs to instantly arrange and collect multiple payments, whilst still giving the consumer a degree of control. Giving control to retain customers will be crucial for businesses in the coming months because, according to statistics from Ordo — over 50% of people who cancelled direct debits by way of belt-tightening during the pandemic say they won’t be reinstating them.
Come next year, services from the likes of Netflix, energy companies and local councils will be billing customers using instant VRP — and organisations will reflect and wonder: ‘what were we doing hanging around for three days waiting for direct debits to clear?’