In November, the Open Banking Implementation Entity (OBIE) launched consultations on Variable Recurring Payments (VRPs) and Sweeping, representing the next stage in the development of Open Banking in the UK. The organisation invited interested parties to respond to the consultation to inform them when creating standards for the processes.
Moneyhub, a digital financial tool for customer-centric organisations in open banking, has made its response to the OBIE public to encourage others to add their thoughts to the consultation. The company has announced it fully supports VRP as it paves the way for the development of payment innovation and the creation of new financial services propositions.
Variable recurring payments allow the customer to safely connect authorised Payments Initiation Service Providers (PISPs) to their bank account so that they can make payments on the customer’s behalf. This is similar to Direct Debits or card payments, but offer more control and transparency for customers. Sweeping is the automated movement of funds for a customer between two accounts in their name, usually to help them avoid charges or allow them to benefit from better interest rates and deals.
Dan Scholey, COO at Moneyhub said: “From the very beginning when we first started lobbying for Open Banking legislation we saw Variable Recurring Payments and Sweeping as core requirements to help both businesses and people improve financial wellness.
“Through our work in the FCA sandbox over the last year, we have proven the demand for VRP and in particular Sweeping. More secure, faster and user friendly than Cards or Direct Debits the only obstacle remaining is fair and open access by all the organisations, such as banks covered by PSD2. We call upon anyone who has payments in their business model to lend your support to driving through this much-needed change.”
A key point from the Moneyhub response is that “thinking must not be limited”, with Scholey explaining that: “The use cases for VRPs exceed the limited cases provided by the legacy payments systems it replaces. There are many more consumer-centric use cases that VRP will open up. It is therefore critical not to limit the thinking to existing use cases where the Card and Direct Debit technology has limited innovation and use.”
They have also advised that VRP should be mandated, but not profit-generating as, “When it comes to security, speed and price, VRPs are a cheaper, more secure replacement for Direct Debits and card payments. VRPs are an enabler for Sweeping, so where Direct Debit is designed for payments into an organisation’s bank account, Sweeping is moving money between a customer’s own accounts. If this is not mandated, adoption of VRP will be limited and will not introduce an innovative payment experience. The lack of a mandate will hinder the creation of new types of financial services for users.”
“Sweeping should not be confined to Current Accounts and Credit Cards. Loans, Savings and Mortgages, Investments and Pensions are all examples of accounts that should be able to benefit from Sweeping. We are moving to a world of Open Finance – and therefore all new innovative payments solutions should support this.”