These are the findings detailed in a new survey report published today by leading account-to-account (A2A) payment infrastructure provider, Token.io, and Open Banking Expo.

The results of ‘The future of Dynamic and Variable Recurring Payments’ research point to an industry that is now fully cognisant of the benefits of commercial VRPs (often called non-sweeping or premium APIs). Indeed, when asked to compare the benefits and disadvantages of commercial VRPs against other payment types, respondents said commercial VRPs come out on top in virtually every category. Frictionless user experience is believed to be a key driver of consumer adoption. The element of control is another important factor, with respondents saying the ability for users to set a maximum individual payment amount is the most useful parameter.

For merchants, appetite and enthusiasm are picking up as 60% said they will actively seek to convert card payments to VRPs, with faster settlement of funds and greater reliability seen as key benefits. Merchants also noted the potential for lower cost of processing than cards. 33% of merchants said they want to convert Direct Debits to VRP, although a common concern was that costs could be higher, given the relatively low cost of Direct Debit.

The report does, however, highlight a potential stumbling block to adoption. While virtually all banks surveyed believe they are likely to benefit commercially by offering VRPs, in reality there is still very limited bank coverage (with the exception of NatWest, who Token.io announced a VRP partnership with last October). The belief in VRP’s potential must, therefore, be translated into reality through accelerated bank commitment to test and then scale VRP. While a comprehensive multilateral framework or agreement may be developed in future, it is crucial that commercial VRPs be first tested and proven across all of the UK’s large retail banks through pilot exercises.

“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,” comments Todd Clyde, CEO of Token.io. “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.”

An overwhelming 90% of survey respondents said they think contractual frameworks should be standardised for commercial VRPs, and a further 70% believe that a fee structure should be introduced. There was also consensus that the UK requires a similar approach to Europe’s SEPA Payment Account Access (SPAA) scheme.

“What has kept VRP firmly in the spotlight is regulation,” comments Ellie Duncan, Head of Editorial and Broadcast at Open Banking Expo. “The JROC VRP Working Group is now working on a blueprint for a scalable implementation of commercial VRP, with pilots expected to begin next year. Once this is underway, I’d like to think the pace of adoption will pick up.”

When asked which use case the JROC pilot should prioritise, the industry firmly believes e-commerce payments offer the most potential. This sentiment was echoed during a panel debate at Open Banking Expo with representatives from the Payment System Regulator, Financial Conduct Authority, NatWest, Tink and Token.io.

“We see a huge amount of interest in VRP for e-commerce from both merchants and payment providers,” said Charles Damen, Chief Product Officer at Token.io during the panel discussion. “As the JROC VRP WG 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.”

“Other jurisdictions are already developing similar capabilities and schemes for premium APIs,” adds Clyde. “In Europe, for example, the introduction of the European Payment Council’s SPAA scheme is creating a foundation for banks and other players in Europe to go beyond the broad directives outlined in PSD2 and create ‘premium’ open banking services, such as Dynamic Recurring Payments, which are analogous to VRP. Such developments could put the UK at risk of losing its position as a leader in open banking and payments innovation, so it’s important the industry acts now to unlock the opportunities that are ready to be realised.”