Open Banking: Plaid Releases New Service for Variable Payments

Popular Open Banking service provider Plaid has announced a new service called Variable Recurring Payments (VRP). Plaid claims the offering can help UK businesses save more than £1.5 billion annually by slicing payment processing fees, according to a company statement.

As the name explains, VRP enables users to approve future recurring transfers between accounts of the same owner with a single authorization.  Settlement is instant, and customer options include one-click purchases.

Plaid noted that the UK Competition and Markets Authority (CMA) has mandated VRP for use cases where money is automatically moved between bank accounts held in one person’s name, also called sweeping or me-to-me payments. UK banks must also allow open banking companies to access APIs for sweeping at no cost.

Sophie Pinto-Raetz, an executive at Expensify Card who is utilizing the Plaid VRP service, shared:

“When we set out to launch the Expensify Card in the UK, we chose to partner with Plaid because VRP are the best way to securely and quickly move money in the UK.  Our aim is to bring the Expensify Card to the UK as quickly as possible, while maintaining the same industry-leading standards as our US version of the card: a direct and seamless integration with the Expensify app, easy options to automate card payment, and transparency throughout the entire expense and preaccounting process. Plaid’s cross-Atlantic presence meant that we could unlock the value of instant payments more quickly with one provider. By partnering with Plaid for VRP, we’ll be able to introduce the Expensify Card to our UK customers much sooner than it would otherwise be available.”

Plaid added that uses include consumer activities like paying utility bills.

Janine Hirt, CEO of Innovate Finance, provided a comment on the new service stating that VRPs can offer efficient solutions when it comes to reducing transaction costs.

“The [Plaid] report calls on policymakers to cap issuer fees at ten basis points to protect their position as a competitive alternative payment method. This would keep fees for VRP slightly lower than card payments’ interchange fees, which are limited at 0.2% for debit cards and 0.3% for credit cards.

Plaid stated that in a few short years Open Banking has helped to bring a tremendous amount of innovation in finance to the market.

Commercial use cases for VRP have the potential to revolutionize the way money moves between consumers and businesses said Dan Morgan, European Policy Lead at Plaid.

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