Variable recurring payments (VRPs)

A key part of open banking’s evolution has been a technology called variable recurring payments for sweeping. This lets individuals automatically move money from their current account to another account (‘me-to-me’ payments), such as moving surplus funds into a separate savings account, or using them to repay a loan or overdraft to cut the cost of borrowing.

However, as we move to open finance, many eyes are now on the next iteration of this technology, known as VRPs for non-sweeping.

These allow authorised providers – such as a utilities company – to initiate a series of payments for their customers (‘me-to-business’) at different intervals, and for varying amounts, instead of paying the same amount each month regardless of what’s owed. Importantly, the customer gets to define these payment parameters, giving them greater control and visibility over repeat expenditure than Direct Debit and card-on-file instructions.

Open finance extends this with payment accounts to allow sweeping between current and savings accounts, helping consumers and businesses to save.

Savings

Savings apps are helping many people to build a regular saving habit by ‘sweeping’ surplus funds from current accounts to interest-generating savings accounts, or by rounding up small amounts of change from shopping bills to add to a savings account.

Open finance could potentially see the creation of innovative products allowing consumers to reverse this process, enabling them to maximise the interest they earn by keeping savings in situ, only moving the money to a current account when needed for mortgage payments, rent or other bills.

The same opportunity could be equally applied to business accounts too, allowing firms to benefit from their savings when their cash flow is strong.