What's Happening?
GoCardless, a bank payment company, has released a report highlighting the constraints faced by UK businesses due to outdated payment systems. The study reveals that legacy payment rails are costing merchants
an average of 3.5% of their total monthly revenue. The report, titled 'Revolutionising Recurring Revenue,' surveyed 489 UK recurring revenue business leaders, with 73% expressing dissatisfaction with traditional card payments. To address these issues, the industry is looking towards the introduction of commercial Variable Recurring Payments (VRPs), also known as Recurring Pay by Bank. This technology is seen as a significant upgrade to the UK's payment infrastructure and is currently in its 'Wave 1' rollout, targeting regulated, low-risk sectors such as utilities, financial services, insurance, and government.
Why It's Important?
The introduction of commercial VRPs is expected to have a substantial impact on UK businesses by reducing operational costs and improving cash flow. According to the report, 91% of decision-makers in the initial rollout phase expect the technology to lower costs, while 89% believe it will enhance cash flow. In the financial services sector, 95% of respondents anticipate cost savings, and 92% expect a reduction in late payments. The technology is also predicted to increase customer satisfaction, with 88% of respondents expressing this belief. The adoption of VRPs could provide early movers with a significant operational advantage, as they can leverage improved payment systems to enhance efficiency and customer experience.
What's Next?
As the rollout of commercial VRPs progresses, businesses are expected to transition towards this new payment method. Early adopters are likely to gain a competitive edge by choosing the right infrastructure partners to minimize execution risks. Consumer readiness is also aligning with corporate demand, with 38% of UK adults open to adopting commercial VRPs, a figure that rises to 60% among Gen Z respondents. Interest is particularly high for essential services like energy bills, where consumers seek increased financial control and security. The industry will continue to test and refine VRPs to ensure their effectiveness and viability.
