Financial regulators in the UK have agreed plans for a Phase 1 roll out of non-sweeping variable recurring payments (VRP) by the third quarter of 2024, in a significant boost to open banking.
The Joint Regulatory Oversight Committee (JROC), co-chaired by the FCA and the Payment Systems Regulator (PSR), has published its response to a VRP working group blueprint for rolling out non-sweeping payments (ie recurring payments between a customer and business), which was delivered in October.
The blueprint recommends payments to regulated utilities, regulated financial services, and central and local government as the first step in creating wider uses for VRP and open banking payments.
Outstanding issues to be addressed include the establishment of a formal dispute resolution mechanisms in the event of payment errors and biller insolvency, and agreement on a commercial model.
The JROC is now calling on Pay.UK and Open Banking Limited (OBL) to chair implementation groups to deliver the functional enhancements and dispute mechanism needed for consumers and business ahead of the delivery of non-sweeping VRP next year.
With regard to a commercial model, regulators agree the need for a multilateral agreement between PISPs and sending firms for Phase 1 VRP to enable easier market access to participants and limit the cost and inefficiencies from bilateral arrangements.
The Committee notes that the Working Group’s discussions demonstrated that there are widely different views held by market participants on how an appropriate price should be reached.
To make progress, the PSR has launched a consultation on parameters for a central price for VRPs based on an incremental cost recovery model for the sending firm.
The co-chairs of the Committee, PSR managing director, Chris Hemsley, and FCA executive director, Consumers and Competition, Sheldon Mills, issued a joint statement: "The whole open banking ecosystem has worked collaboratively to deliver this progress.
"We now expect to see consumers and businesses starting to benefit from new and innovative ways of managing and making payments on a wider scale."
Other issues covered by the JROC in its end-of-year report include the future structure of the new oversight entity for open banking.
States the Committee: "The future entity will be instrumental for the future success of Open Banking in the UK, and the Committee will make a decision as to its recommended structure, governance and funding model early next year. In Q1 next year, the Committee will publish this decision and the immediate steps which will be taken to establish the future entity.