For years now, fintechs and new digital banks have been taking market share from the big incumbents that are still held back by high-cost and inefficient legacy technology.
But a helping hand from the regulators may have pushed the big banks ahead in what could become a key innovation in the era of open banking: variable recurring payments (VRPs).
VRP is a new form of regular payment that does not entail the repeated authorizations and two-factor authentication required by merchants that hold credit cards on file. It can also transfer cash almost instantly into a recipient’s account rather than taking two days to settle as with direct debits.
It works as a form of standing order, but one that can be managed through third-party payment providers in open banking APIs as long as they abide by the parameters set by account holders around frequency of payments to be taken and maximum amounts.
Rather like contactless and ApplePay, VRPs are likely to become ubiquitous very quickly
Customers will be able to use VRP to pay household bills and utility charges as well as for subscriptions, a growing feature of modern economies covering everything from film streaming to cars.
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