'More collaboration' needed in next phase for VRP – Token.io
Greater industry collaboration is needed to unlock the commercial opportunity that lies in variable recurring payments (VRPs), according to open banking company Token.io.
VRPs allow consumers to authorise third party providers (TPPs) to initiate a series of payments from their bank account using conditions and limits that are pre-defined by the customer. It’s an emerging technology that Token.io itself describes as “the hottest three letters in open banking”.
Now the company has released new research, entitled The Future of Dynamic and Variable Recurring Payments, which sets out the size of the opportunity within VRPs. Their survey polled senior leaders from banks, merchants, payment providers and technology providers throughout Europe, and among the findings, Token.io has established that appetite among merchants for VRPs is growing. Six in 10 of merchants say they will actively seek to convert card payments into VRPs.
Faster settlement, greater reliability and lower costs of processing are all seen as upsides of VRPs. The ability for users to set a maximum payment amount is also seen as a useful parameter within variable payments. But there is still limited bank coverage for VRPs, and, despite banking leaders acknowledging the commercial potential of broader adoption, 90% think contractual frameworks should be standardised for commercial VRPs and 70% believe that a fee structure should be introduced.
Other jurisdictions could benefit, Token.io says, from introducing similar regulatory frameworks such as the European Payment Council’s SEPA Payment Account Access (SPAA) scheme, which is paving the way for “premium” open banking services like VRP – or Dynamic Recurring Payments, as they’re sometimes known on the continent.
Need to ‘collaborate and iterate’ future of VRP, Token.io says
Todd Clyde, CEO of Token.io, says: “Our research reinforces our conviction that commercial VRPs are seen as a faster, more secure, convenient, and cost-effective alternative for recurring payments. Banks believe they will benefit commercially by offering VRPs, and merchants are planning to add VRP as an alternative to card payments
“But clearly work is needed to incentivise further adoption and create the market conditions needed for VRP to become a reality. Our report, and the conversations we heard at Open Banking Expo last week, all point to the need for greater bank coverage to allow merchants and PSPs to offer their customers a superior form of payment.”
Charles Damen, Chief Product Officer at Token.io, continues: “We see a huge amount of interest in VRP for ecommerce from both merchants and payment providers. As the [industry’s Joint Regulatory Oversight Committee VRP working group] continues its work to build a vision and plan that will, ultimately, help the industry scale commercial VRP, I would like to see TPPs, banks and merchants collaborate and iterate to get VRP pilots off the ground before the second half of next year.”
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