2024年はバリアブルリカーリングペイメントが普及する年になるか？

A year ago, the immediate future for variable recurring payments (VRPs) looked bright. The implementation deadline for sweeping transactions in the UK had passed, and there had been several announcements of successful pilots and commercial agreements being struck with NatWest for non-sweeping VRPs. Speaking to people in the industry on the subject, it was clear that many expected other banks to follow swiftly in reaching their own commercial agreements with payment initiation service providers (PISPs).

In parallel there was also clear momentum behind this concept at European level. A model for Dynamic Recurring Payments (DRP) was front and centre in the Sepa Payment Accounts Access (SPAA) initiative. DRP and VRP are similar propositions, in allowing customers to give ongoing consent for a payee to initiate transactions from their account (within certain parameters), with a revenue flow back to the account holding institution. In other words, both DRP and non-sweeping VRP represented a clear potential revenue opportunity for participating banks.

Such was the opportunity in this area, we at Celent published a report in late 2022 (A Primer on Variable Recurring Payments: The Next Big Thing in Open Banking?) that outlined the broad business rationale for banks to invest in this area. The conclusions in here still hold, including our view that VRP and DRP should be seen as a clear opportunity to kickstart the broader commercialisation of open banking. After all, those banks that enter into commercial agreements for VRP would build the organisational know-how and muscle memory needed to explore the far wider range of other open banking monetisation opportunities. The necessary skills here include the methodologies for creating pricing and liability models, as well as managing the expectations of third-party stakeholders.

There are several areas in the payments landscape in which commercial VRP can bring value to both payers and payees. The most attractive areas for banks to explore in the short-term were those characterised as being relatively low risk, easy to penetrate, and with clear economic benefits for the business accepting the payment. The two that top the pile are account funding (for use cases such as investment accounts, or wallets that don’t qualify for the use of sweeping VRPs), and subscription payments (largely to displace continuous card mandates).

While far larger opportunities in terms of overall payment volume, bill payments and digital commerce are slightly more complex areas for VRP to penetrate. In digital commerce in particular, the lack of a clear liability framework around VRP and widespread use of digital wallets are a challenge to rapid adoption in the short term. In the case of bill payments, while VRP can bring benefits over and above Direct Debit, the maturity of this as a recurring payment method is a barrier to quick volume growth.

Qualitative comparison of the leading near-term non-sweeping VRP use cases for banks

What a difference a year makes?

VRP volumes are growing, and quickly. According to data from UK Open Banking, there have been over 4 million successful VRP transactions since October 2022. This has increased from around 10,000 a month then to over 1 million a month in both August and September this year and shows a far steeper adoption curve than for single initiated open banking payments. In September, VRP accounted for 8.7% of the 11.8 million open banking-initiated payments made in the UK, showing that the concept clearly resonates.

However, we are some way from commercial VRP growing at this kind of pace. Most of today’s VRP transactions will be for account sweeping transactions, and there remain important hurdles to overcome before commercial VRP can begin to grow. At both European level (with DRP) and in the case of VRP in the UK, difficulties in shaping the necessary commercial, risk, and liability frameworks remain a significant limiting factor.

While banks are understandably keen to avoid cannibalising revenues from other parts of their business (chiefly cards), unless VRP is price competitive compared to alternatives, it will simply not be attractive to merchants and other businesses. Reaching a sensible landing point on pricing is therefore essential. Establishing an equally balanced approach to risk and liability is also an active discussion at UK level.

Crystal ball time: Where will we be in late 2024?

The obvious conclusion from the past year is that the initial expectations around commercial VRP and DRP were a little too optimistic and underestimated the challenges in agreeing the necessary commercial frameworks. While there is a clear business opportunity for banks, it will take time to develop, and only once a critical mass of industry participants strike the agreements needed to drive adoption. This will require further and deeper cross-industry collaboration.

These negotiations are detailed, complex, and require costs, risks, and benefits to be shared across a value chain. In short, it doesn’t happen quickly. Celent understands that progress is being made at both UK and European level on these points though, and there is a real a sense of optimism in the market for the outlook for commercial VRP and DRP. That said, there is still further work to be done.

In the meantime, it’s likely that we will see the use of open banking continue in other areas around the payment landscape. It’s common now for PSPs to offer single initiated open banking payments as an option in digital commerce for example, while others are targeting the recurring payment space by using open banking in the workflow for setting up Direct Debit mandates.

Looking ahead, it seems we should expect 2024 to be a year of two halves. With more work to be done on the commercial, risk, and liability frameworks, it seems likely that the first half of the year will be devoted to furthering these discussions. Assuming this is achieved, it seems reasonable to expect to see volume growth beginning in H2.

There is still much that needs to be achieved, but a review of the progress of VRP and DRP a year from now is likely to be a far more positive one.