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July 26, 2022

GoCardless launches Variable Recurring Payments ‘to shake up the status quo’

Variable Recurring Payments are a hot topic and so GoCardless’ launch of its VRP offering represents impeccable timing

By Douglas Blakey

GoCardless is launching its Variable Recurring Payments offering enabling developers and financial service providers to prepare for the CMA’s deadline for ‘sweeping’ on 31 July.

GoCardless director of product marketing Siamac Rezaiezadeh discusses the launch of VRP with RBI editor Douglas Blakey

The VRP roll out means GoCardless can now support one-off and recurring transactions through open banking. Moreover, developer docs are live and a sandbox will be unveiled in the coming weeks for merchants to test their VRP readiness as banks begin to introduce the new technology to the public.

GoCardless director of product marketing Siamac Rezaiezadeh tells RBI: “We’re delighted to launch Instant Bank Pay for recurring payments. This gives merchants a head start on VRPs as banks begin their rollout. We’ve now had hundreds of conversations with businesses across the country. What stands out again and again is their enthusiasm for VRPs — especially that moment when they realise how this new technology can unlock their future growth plans. We’re proud to power the payments for these innovative companies so they can get on with what they do best: shaking up the status quo.”

What is a VRP?

A VRP will allow customers to safely connect authorised payments service providers (PISPs) to their bank account. Providers can then make a series of payments on a customer’s behalf within agreed parameters, offering more control and transparency than existing alternatives.

For many consumers and small businesses, the most well-known method of collection for a recurring payment is via Direct Debit or continuous payment authority (CPA) – a type of recurring payment that a merchant makes using their debit or credit card details.

Unlike these two well-known methods of payments, a VRP works by letting customers safely connect authorised PISPs to their bank account so they can make payments on their behalf.

VRPs offer a range of benefits over Direct Direct and card CPA to both the small business making payments and the small business receiving payments, as the table below sets out.

What is ‘sweeping’?

Sweeping is a particular proposition which can be developed using a VRP to automatically move (or sweep) money from one of their accounts to another of their accounts. There are many examples of where this could be used, such as sweeping funds from a current account to a savings account, or a current account to a loan account.

The Competition and Markets Authority (CMA) mandated the leading nine retail banks to make VRP functionality available, for free, to any PISP as long as the payment is specifically for the purposes of sweeping.

This means that PISPs can develop solutions for customers to help them run their finances run more effectively, and ultimately make their money work harder.

For example, money can be automatically transferred between accounts, such as moving excess funds into an account where it can generate interest. Alternatively, it could be used to transfer money to repay an overdraft or loan account.

Start-up Pillar chooses GoCardless offering to make credit scoring borderless and inclusive

Pillar, the new fintech platform breaking down credit borders, is the latest early adopter to choose GoCardless to power its payments for a new and more inclusive era of credit across the globe.

Pillar raised a pre-seed round of £13m ($16.9m) led by Global Founders Capital and Backed VC earlier this year. It will use the GoCardless platform for Direct Debit and VRP.

Specifically, Pillar is developing a new global financial platform which will provide immigrants with access to credit products when moving to a new country. By offering VRPs as a key part of its payment functionality, Pillar will provide customers greater control over their finances through the ability to set payment parameters and make and cancel recurring payments instantly.

A more seamless payment experience

Customers will also enjoy a more seamless payment experience: VRPs enable them to authenticate recurring payments with a single click, eliminating the need to re-authenticate or re-authorise every transaction.  With its mission to break down credit borders and unlock access to financial products around the world, Rezaiezadeh says Pillar represents a great example of VRPs in practice.

“By tapping into our unique combination of Direct Debit and VRP, Pillar can customise its payment strategy and take advantage of all the benefits of direct bank payments, from lower fees to greater reliability.”

GoCardless active in VRP space since 2019

He adds that GoCardless has been active in the VRP space since 2019, when it took the first live transaction through a sandbox developed by the OBIE. In June, GoCardless was chosen by NatWest Group to provide VRPs as a new payment option for businesses and consumers, in addition to launching a ‘non-sweeping’ VRP pilot with NatWest and Charity Right. The launch of recurring payments for Instant Bank Pay means GoCardless will enable multiple companies in the financial sector, such as Pillar and Nude, to use VRPs to provide instant, account-to-account payments.

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