A 31-member consortium including Acquired.com and Lloyds Bank is developing Variable Recurring Payments (VRP) for utilities and rail, driven by new UK Open Banking rules. The system enables dynamic billing and real-time fund verification, challenging legacy direct debit systems.
The UK’s payment landscape is undergoing a radical transformation as Variable Recurring Payments (VRP) gain traction in regulated sectors. With Ofgem’s new billing regulations taking effect in January 2025 and 78% of businesses demanding flexible payment options (FCA data), the consortium’s real-time payment infrastructure could render traditional direct debit systems obsolete.
Regulatory push accelerates VRP adoption
The UK’s July 2024 Open Banking roadmap update has become a catalyst for payment innovation, with Pay.UK confirming mandatory ISO 20022 compatibility for VRP systems by Q3 2025. This technical standard enables the consortium’s central operator systems to process complex dynamic rules through APIs – a capability critical for usage-based billing in utilities and demand-based pricing in rail.
“We’re building compliance into the payment flow itself,” noted Acquired.com’s CTO in a July 18 press release. “When Ofgem adjusts price caps or rail operators implement surge pricing, the VRP system automatically recalculates payments without manual intervention.”
B2B applications expand beyond utilities
While initial implementations focus on regulated industries, Gartner predicts 35% of enterprise billing systems will integrate VRP by 2025. The technology particularly suits SaaS subscription models, where Juniper Research (2024) found real-time fund verification reduces failed payments by 40% compared to traditional direct debit.
HSBC’s July 15 consortium membership signals expansion into cross-border applications, currently testing VRP for Eurotunnel’s dynamic pricing ecosystem. “This isn’t just about replacing direct debit,” commented a Lloyds Bank payments executive in Finextra. “We’re creating an infrastructure for the next generation of performance-based contracts.”
Historical context: From fixed to fluid payments
The VRP initiative mirrors earlier payment revolutions that responded to regulatory shifts. The 2017 PSD2 regulation similarly forced banks to open their APIs, though implementation lagged behind ambitions. Where PSD2 enabled account access, VRP adds the critical layer of programmable payment rules.
Legacy direct debit systems dominated B2B payments since the 1960s by offering predictable scheduling. However, UK Finance’s Q2 2024 data shows 62% VRP transaction growth as energy companies adopt dynamic billing ahead of winter price caps – suggesting fixed-frequency payments may become the exception rather than the norm in regulated industries.
