The European open banking platform TrueLayer has become the first to deliver variable recurring payments (VRP) for both non-sweeping and sweeping use cases through a single application programming interface (API).
VRPs allow a third party to initiate recurring payments from a person’s bank account on a continuous, usually monthly basis. Third parties could pertain to subscription service providers or bill payments for example.
TrueLayer’s API will enable businesses to connect to selected UK banks to take VRP from their customers. The VRP API also allows businesses to ‘sweep’ payments, transferring money between two accounts belonging to the same customer, whilst also enabling VRP transparency, speed and control for more people in the UK as a replacement for direct debit and card-on-file payments.
The problems with direct debit and card-on-file
Using open APIs, VRP allows companies to collect recurring payments of variable amounts from their customers. In a way, they’re similar to direct debit and card-on-file payments, but without the issues that affect these methods.
Unlike the speed associated with the capabilities of open banking, it can take up to five days to settle a direct debit transaction, whilst the wait can be as long as 10 days with card payments.
This delay prevents businesses from handling their cash flow effectively, whilst also hindering users from accessing the services they want to use.
Both direct debit and card-on-file payments lack key security features. Setting up card-on-file payments requires customers to share sensitive credentials, leaving them vulnerable to security breaches and fraud.
Direct debit doesn’t involve credential sharing, but it lacks strong customer authentication (SCA) measures. Cards in particular present several other issues for merchants. They can draw steep interchange and processing fees, both of which are expensive for businesses.
Then there are chargebacks, which present additional penalties and could expose companies to friendly fraud.
The VRP solution
VRP provides a solution to many of the aforementioned problems with direct debit and card-on-file. Instead of a single payment credential as would be expected from a card, consumers can set up unlimited recurring payments by establishing various VRP mandates to specific merchants and payment amounts.
VRP lets users know exactly where their money is going, alongside the power to revoke specific allowances or subscriptions more easily. TrueLayer’s VRP also incorporated the latest SCA measures, implemented nationwide in March, allowing for a better customer experience compared to cards.
Businesses can also benefit from real-time settlement, o9wer transaction fees and the near-elimination of card fraud.
TrueLayer’s VRP can be leveraged to facilitate both sweeping and non-sweeping use cases. Sweeping use cases include tasks like funding savings accounts; moving money from one account you own to another account that you also own.
The platform is also set to offer non-sweeping applications, including both fixed and variable subscriptions, enabling merchants to take payments for things like your phone bill, rent, energy bill and streaming subscriptions.