The open banking network is introducing Variable Recurring Payments to save customers payment processing fees.
After discovering that UK businesses could be saving £1.5bn annually in payment processing fees, Plaid is launching its own Variable Recurring Payments (VRP).
The open banking network is releasing the product to help customers in the UK with online payments and to enable recurring transfers between users’ own accounts with just one authorisation.
The new product comes after a six-month delay from the Competition and Markets Authority (CMA) to implement VPR.
The CMA has now mandated VRP for use cases where money is automatically moved between multiple bank accounts held in one person’s name, also known as sweeping or me-to-me payments.
“As households and small firms grapple with rising costs, further developments of open banking tools can provide solutions that help improve productivity and reduce costs,” Innovate Finance CEO Janine Hirt said.
“Commercial VRPs can offer these efficient solutions and have an important role to play for businesses when it comes to reducing transaction costs.”
This, in turn, can help lower costs for potentially vulnerable consumers, Hirt said.
VRP allows businesses to authorise future payments directly from a bank account with one authorisation.
As part of the current mandate, banks must also allow companies like Plaid to access APIs for sweeping at no cost.
Beyond that, VRP also encompaases a wider set of possible use cases, including managing active subscriptions and paying utility bills.
Plaid’s data analysis report found that if VRP was extended beyond the current mandated sweeping use cases and the low cost was protected, UK businesses could save as much as £1.5bn annually.
“Commercial use cases for Variable Recurring Payments have the potential to revolutionise the way money moves between consumers and businesses,” Plaid European policy lead Dan Morgan said.
“However, we need UK policymakers to step in and ensure that unfair pricing practices don't dampen adoption and prevent increased market competition. With their help, the industry can help consumers and businesses realise the full benefits of this new payments option.”
Payments super-app Expensify is one of the first customers to use Plaid’s VRP product.
It allows the companies to automatically pull varying repayments from their customers’ businesses accounts to settle card balances.
Sophie Pinto-Raetz, who is leading the launch of Expensify cards in the UK, said VRP is the “best way to securely and quickly move money in the UK”.
“Plaid's cross-Atlantic presence meant that we could unlock the value of instant payments more quickly with one provider,” Pinto-Raetz said.