On the 22^nd of June, Edgar, Dunn & Company (EDC)hosted a webinar that explored the potential of Open Banking and non-sweeping or commercial Variable Recurring Payments (VRPs) in the payments industry. The panellists included Eline Blomme, VP Product, eCommerce & VAS at Truelayer, David Cox, Payments Strategy Lead at Virgin Media, Shiona Crichton, CEO at Moneyline and Chris Harris, Vice President - Open Banking at Mastercard.

Open banking has experienced significant growth, especially over the past year, with millions of payments and satisfied UK consumers. By combining data sharing and payments, it has revolutionised the financial services landscape by offering efficient single one-off payments.

Open banking shows great potential around commercial recurring payments, specifically through VRPs. VRPs have emerged as an appealing alternative to traditional payment methods such as Card-on-File (COF) or Direct Debits, by providing improved customer experiences, instant settlement, and cost savings. Although open banking is a relatively new concept compared to direct debit, it has the potential to take subscription payments to another level. While direct debit has limitations in terms of control over timing and amounts, open banking can provide customers with greater control and flexibility. VRP could also be more appealing to consumers, as they would have the ability to approve transactions, to adjust them and potentially schedule a follow up transaction, thus creating more trust, confidence and customer engagement for merchants. Additionally, open banking can also offer cost savings for merchants by, for example, avoiding the administrative overhead of managing Direct Debit mandates.

To ensure the success of VRPs, the webinar panellists emphasised the need to address several key challenges. Firstly, interoperability and consistency across platforms will be essential to meet consumer expectations. Proportionate consumer protections should be universally implemented, which requires collaboration amongst all stakeholders. Secondly, long-term investment and a robust commercial model are crucial to ensure the sustainability of the solution in the long run. Thirdly, reinventing cost structures and streamlining chargeback processes present significant challenges, as well as opportunities to reinvent the handling of exceptions. Finally, educating customers about the benefits of open banking and establishing a recognisable name and identity for VRP will be imperative for its widespread adoption by both businesses and consumers.

Although these challenges remain, regulatory bodies such as the Joint Regulatory Oversight Committee (JROC) in the UK and working groups are actively tackling them. Looking towards the future, open banking has the potential to transform the payment landscape, offering customers greater control, financial inclusion, and cost efficiencies for businesses who choose to embrace open banking.

You can access the webinar recording here: