INSIGHTS ¦ Commercial Variable Recurring Payments

UK Finance

Summary

This report discusses the implementation and governance of Commercial Variable Recurring Payments (cVRP) in the UK, focusing on model clauses that could potentially form a part of multi-lateral or bi-lateral contracts. It examines various aspects of the cVRP system, including payer protections, risk management, and the regulatory framework, aiming to foster a robust, efficient, and secure environment for these types of payments.

Key Points

  1. Definition and Scope: cVRPs are an evolution of the payment industry, leveraging open banking frameworks to enable variable recurring payments.
  2. Regulatory Background: Governed by the PSRs 2017 and the CMA Order, cVRPs lack a solid regulatory mandate, which leads to reliance on contractual agreements.
  3. Stakeholder Engagement: Wide participation from banks, fintechs, and other payment service providers under the oversight of UK Finance and Addleshaw Goddard.
  4. Standardisation and Clauses: Development of model clauses for voluntary adoption, aiming to standardise practices and reduce transaction costs.
  5. Risk Management: Emphasis on robust biller onboarding and monitoring processes to mitigate risks associated with bad actors in the system.
  6. Consumer Protection: Consideration of existing and potential future protections under cVRP transactions.
  7. Technological Infrastructure: The importance of maintaining adaptable and secure API standards for cVRP transactions.
  8. Change Management: Strategies for managing and communicating changes in cVRP standards to ensure consistency and minimize disruption.
  9. Future Directions: Potential for an industry-wide multilateral agreement to further streamline and secure cVRP practices.
  10. Compliance and Legal Considerations: Continuous review of competition and data protection laws to align with evolving payment practices.
  11. Dispute Resolution: Focus on developing effective mechanisms for handling disputes arising from cVRP transactions.
  12. Record Keeping: Importance of detailed and accessible records to support transparency and facilitate dispute resolution.
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Key Statistics

  • Participation from 12 major UK Finance members, including six banks and five fintech companies.
  • Development led by a diverse steering committee, with representation from across the financial services industry.
  • Proposed standards aim to reduce the transaction cost of bilateral negotiations and enhance user experience.
  • Adoption of model clauses is entirely voluntary, with no regulatory obligation enforcing their use.

Key Takeaways

  • cVRPs offer a flexible and potentially efficient payment method but require careful governance to ensure security and trust.
  • Effective stakeholder collaboration is crucial for the development and acceptance of cVRP standards.
  • There is a significant focus on risk management, particularly regarding the onboarding and monitoring of billers.
  • Consumer protection is a priority, with ongoing discussions about extending existing safeguards within the cVRP framework.
  • The development of a multilateral agreement could standardise practices and reduce inefficiencies in the cVRP market.
  • Continuous technological and regulatory updates are necessary to adapt to the evolving payment landscape.
  • Record-keeping plays a vital role in ensuring transparency and accountability in cVRP transactions.
  • Dispute resolution mechanisms must be robust to maintain consumer confidence and system integrity.
  • The industry must remain vigilant against the misuse of cVRP systems by bad actors.
  • Future enhancements may include stricter regulations and expanded protections for users.
  • Collaboration with regulatory bodies is essential for the successful integration of cVRP into the broader payment ecosystem.
  • The model clauses serve as a foundational step towards a more regulated and structured cVRP environment.


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