The Financial Conduct Authority (FCA) and Payments System Regulator (PSR), the UK’s financial and payments regulators, are preparing for the next evolutionary step for open banking as they reveal that over 22.1 million open banking payments are made monthly.
With over 11.7 million users, open banking is a big success story in the UK. Over the past year, 20 firms voluntarily funded development in the sector’s fraud analysis capabilities, consumer protections and new open banking services such as variable recurring payments (VRPs), which will give consumers greater sight and control over their regular payments.
The FCA and PSR have aligned themselves with the National Payments Vision, and the government’s growth agenda to continue supporting open banking’s development. Evidence of this can be seen in the FCA’s chief executive, Nikhil Rathi‘s letter to the Prime Minister and the PSR’s recent strategy update.
Commenting on last week’s letter and the new announcement, Tom Burton, external affairs and public policy at GoCardless, the paytech, said: “Last week, the FCA wrote to the Prime Minister and Chancellor to say that, ‘certainty and predictability underpin business and investor confidence’.
“Today’s statement is welcome clarity that an independent central operator for VRPs will be created. We need the regulators and industry to pull in the same direction now and work out how this will be done successfully with a view to launching VRPs as early as possible this year.”
Success in 2025
It is critical that the collaboration seen in 2024 across the industry continues into 2025. One aspect of the sector’s growth lies with the variable recurring payments according to the FCA and PSR.
As a step towards using open banking payments for e-commerce, variable recurring payments will help consumers to take greater control of their regular payments. It will do this by allowing customers to control how much can be paid at one time or over the course of a month, reducing the risk of unexpected expenditure.
For businesses, variable recurring payments offer greater competition to current payment methods and could help reduce processing fees. They could also increase the proportion of customers who complete a payment, through better user experiences.
As part of the next steps to deliver variable recurring payments, Open Banking Limited will play a key role in establishing an independent central operator to coordinate how variable recurring payments are made.
This new company, endorsed by the FCA, will see live services available for consumers to make recurring payments to:
- utility companies
- government
- financial services firms
Excitement ahead
Charles Damen, chief product officer at Token.io, commented on the focus on VRPs saying: “It is clear from the UK’s National Payments Vision that continued success in account-to-account (A2A) payments and the development of VRP are critical for driving the UK’s digital innovation and economic growth agenda.
“VRP is a breakthrough providing consumers and businesses with an innovative and long-awaited alternative for seamless, flexible and competitive e-commerce payments, underpinned by a sustainable commercial model for banks.”
Nicole Green, VP API product strategy, innovation and policy, Yapily also added: “We are pleased the FCA and PSR have come to a decision on who will drive forward the development of the cVRP MLA Operator. We look forward to working with OBL, UK Finance and the wider ecosystem to shape the Operator over the coming months. Progress in this regard is crucial, along with the development of the commercial model and decision on bank participation, to launching Wave 1 use cases later this year.
“Ultimately, it is key to get going so that we can make crucial learnings that will enable us to progress to e-commerce use cases in 2026.”
