Deep Dive

The power of Variable Recurring Payments (VRP)

Martin Granados
January 16, 2024

First off, let’s start with what Variable Recurring Payments even are. If you ask Google Bard that question the answer is:

“Variable recurring payments (VRPs) are a type of payment instruction that allows customers to authorise a payments provider to make a series of future payments from their bank account. The amount of each payment can vary, depending on the agreed terms.

VRPs are similar to direct debits, but they offer more flexibility and control for customers. With VRPs, customers can set up a mandate that specifies the maximum amount that can be paid each time, as well as the frequency of payments. This can be helpful for businesses that need to collect variable amounts from customers, such as energy companies or subscription services.”

But to put it simply, VRPs make life easier for both businesses and consumers. It uses open banking technology to combine the benefits of card-on-file, direct debits and standing orders. It allows consumers to securely and easily set up repeat payments of varying amounts, while providing businesses increased confidence when it comes to payments being received on time, reducing fraud risk and more.

Leveraging VRP at Incredible

We knew early on that we wanted and needed to help people see the power of reducing their debt. To understand how it’s comparable, in some cases better than, saving or investing. We began by thinking of how we can apply an already familiar concept to create an easily understandable example that shows the impact of reducing debt, that’s when we landed on Roundups. The entire premise of Roundups is to take something small, pool it together and see how it can turn into something bigger, so it was a perfect match. 

To bring this idea to life, we partnered with the brilliant team at TrueLayer to utilise their Variable Recurring Payments (VRP) functionality, which allowed us to create a mandate from a customers bank account, through which we can monitor transactions for spare change and sweep it up to be paid to their debts. This is only the start for us when it comes to utilising this new technology

Our thoughts on the possibilities of VRP

We’re very optimistic about the future of VRPs, especially as it starts to expand into other parts of everyday life. We think there are a lot of businesses who will be able to offer some amazing features that double down on increasing customer convenience much like the infamous one click buying technology that amazon had for so many years. You could potentially enable micro-transactions, in a non-evil way of course for things like super smooth purchases at music festivals or in our particular use case: rounding up small amounts of your expenses every week to help you allocate it towards reducing your credit card debt. Proving you can still have that tasty treat while improving your overall financial position. It is a perfect way to interact with your customers that most likely will be recurrently performing payments while removing the friction of the payment every single time.

We’re very optimistic about the future of VRP’s especially as it starts to expand into other parts of everyday life. It sets a new foundation for how businesses and consumers can engage. We’re excited by what it makes possible for consumers; like monitoring when you might incur a late fee and ensuring we can move money from one account to another. The convenience it brings for businesses and consumers alike are much like the infamous one click buying technology that amazon pioneered - but in this case, there is so much more possibility to improve the customers outcome.l

This is obviously just a first glance at the potential of the feature given that it's still quite early and hasn't' been deployed across the ecosystem. But we are super excited to embrace this technology and push forward with it. Anything that simplifies the transactions online is a win in the field. And what could be better than helping reduce the interest consumers pay on their debt and simplifying the process to pay everything in one place.

So how does it work? 

There are some requirements for VRP to be able to be set up on your behalf. First of all, customers need to authorise where they agree we can take payments from their payment account. The required steps for this involve:

  1.  Defining the mandate and the parameters of how much and how often the customer agrees to have money taken from their account. 
  2. Customers go through a mandate authorisation process that involves their bank account. 
  3. Finally we can perform a payment against the parameters approved by the customer, receive updates on the status of these payments and receive funds or move them appropriately.

If you’re interested in more about setting up VRPs and automating things with code then check out their their documentation via the link below :