UK Finance has outlined a set of contractual arrangements that can be used between account providers and payment service providers (PSP) who are facilitating Variable Recurring Payments (VRPs).

VRPs are a form of payments instruction that allows customers to authorise registered payment service providers (PSP) to initiate payments from their bank account on an ongoing basis.

While VRPs are already in place for certain use cases, they have the potential to be used in a wider context for commercial applications, like paying a phone bill.

In a new report, UK Finance put forward several key objectives for these contractual agreements, or “model clauses”, which include driving competition; increasing efficiencies by removing some of the transaction cost of bilateral negotiations between payment providers; and making sure banking customers have a consistent experience across safety, security and assurance.

The trade association, which represents more than 300 banks and financial services firms in the UK, said that these clauses represent a “genuine landmark” in the development of VRPs.

While the open source clauses are voluntary, the organisation is encouraging those involved with Open Banking to consider their use "where possible".

“The thought leadership and model clauses we have developed with different types of firms including banks, FinTech and schemes are a significant milestone in the progression of Variable Recurring Payments and a stepping-stone to a wider Multilateral Agreement," said Jana Mackintosh, managing director for payments, innovation and resilience at UK Finance.

She went on to say that UK Finance will be working with the Joint Regulatory Oversight Committee (JROC) and other stakeholders in the Open Banking ecosystem to expand VRPs through a "commercially driven model".

The JROC, which has identified VRPs as a key test case for premium APIs, is made up of the Financial Conduct Authority, Payment Systems Regulator, Competition and Markets Authority, and HM Treasury, and considers the vision and strategic roadmap for further developing Open Banking, and the planning, preparation and overseeing of the future Open Banking entity.

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