After extensive analysis, London-based open banking network and payments platform Plaid has today launched a variable recurring payments product, vowing to save UK businesses up to £1.5 billion in fees, dependent upon policymakers opening the taps.
In order to facilitate such opening of said taps, Plaid now has a system in place for regularly recurring money movements between accounts of the same owner with one authorisation.
Now if this sounds a whole lot like direct debits or card-on-file payments, you’re not wrong, however, where Plaid’s VRP USP lies is in the authorisation of future payments with one one authorisation. This then allows for one-click purchases of a recurring payment option, while at the same time minimising fees.
In a new report issued by Plaid, the company found that if the current VRP is extended beyond the current mandated sweeping use cases and their low cost is protected, UK businesses could save as much as £1.5 billion.
Non-profit organisation Innovate Finance’s CEO Janine Hirt elaborates, “As households and small firms grapple with rising costs, further developments of open banking tools can provide solutions that help improve productivity and reduce costs. Commercial VRPs can offer these efficient solutions and have an important role to play for businesses when it comes to reducing transaction costs. In turn, this can also indirectly help lower costs for consumers which could be valuable as the cost-of-living rises.”
Plaid’s report calls up lawmakers to cap issuer fees at ten basis points to protect their position as a competitive alternative payment method. This would keep fees for VRP slightly lower than card payments’ interchange fees, which are limited at 0.2% for debit cards and 0.3% for credit cards.
"In just five years since its inception, Open Banking has helped to bring a tremendous amount of innovation in finance to the market. Commercial use cases for Variable Recurring Payments have the potential to revolutionise the way money moves between consumers and businesses. However, we need UK policymakers to step in and ensure that unfair pricing practices don't dampen adoption and prevent increased market competition. With their help, the industry can help consumers and businesses realise the full benefits of this new payments option," concluded Plaid’s European policy lead, Dan Morgan.