The first live Variable Recurring Payment (VRP) transaction (and other payments news)

Issue 223 | 20 December 2021

Dec 20, 2021

Welcome to this week’s new Payments:Unpacked subscribers, thank you for subscribing!

Share Payments:Unpacked and receive a free months subscription

Please share this newsletter across your social media networks, if you share Payments:Unpacked and tag me in your Twitter (@_mike_chambers_) or Linked In (@-mike-chambers-) post you’ll receive a free months subscription to the premium version of Payments:Unpacked for every1 post you make.

Share Payments:Unpacked

First live Variable Recurring Payment (VRP) transaction

NatWest has become the first UK bank to conduct a live transaction using Open Banking-initiated Variable Recurring Payments.

VRPs allow customers to connect authorised payments providers to their bank account so that they can make payments on the customer’s behalf within agreed parameters. This is a change to the current Open Banking status quo where TPPs can only initiate single immediate payments and customers have to authenticate each payment separately.

Initially scheduled for roll out in January, the Competition and Markets Authority was forced to push back the deadline by six months after acknowledging that the UK's major banks did not have a realistic chance of meeting the target date.

Working with Open Banking infrastrucutre provider TrueLayer, NatWest has delivered its VRP API ahead of schedule and tested the transactions in a live environment.

VRP is ground-breaking innovation that has huge potential to benefit consumers and businesses. It demonstrates the value of industry collaboration, which is crucial if Open Banking is going to evolve into Open Finance.
Daniel Globerson, head of bank of APIs at NatWest Group

Confirmation of Payee goes cross-border for Dutch and French banks

Europe has its first cross-border Confirmation of Payee service, thanks to a partnership between SurePay, SepaMail.eu and StreamMind.

The service enables companies and banks to check that the account information entered matches the intended beneficiary when initiating cross-border payments between France and the Netherlands.

Sepamail.eu offers an account checking service in France for more than 90% of bank accounts and SurePay’s Iban-Name Check platform covers 99.5% of all online payments in the Netherlands. StreamMind has orchestrated the set-up and ensures a reilable connection between the two entities.

The partnership will connect over 30 Dutch banks, accounting for 99.5% of all online payments in the Netherlands, and 114 French banks accounting for more than 90% of French bank accounts.

Since implementing our Iban-Name Check for banks and corporates in the Netherlands in 2017, our customers have witnessed an 81% drop in reported scams and a 67% drop in misdirected payments. The natural next step was to make our solution available for cross-border payments.
David-Jan Janse, CEO of SurePay

ISO 20022 - a new messaging standard for payments

Martin Runow at Barclays Corporate Bank has been reflecting on 40 years of SWIFT formats:

In 1977, the world was a very different place; the charts were topped by ABBA, Elvis Presley and Rod Stewart, the first Apple II computers went on sale and SWIFT went live in 22 countries, processing 10 million payment messages just 12 months later.
Despite the rapid evolution of technology over the last 40 years, messaging formats have remained largely unchanged, even as the volume of payment transactions exploded to over six billion in 2020. Finally, the world’s biggest payment schemes, banks and SWIFT are coming together to adopt a single messaging standard across the globe, ISO 20022.

For more on a watershed moment and a common payments language for the modern world read Martin’s blog: ISO 20022 - a new messaging standard for payments

Current account balances and current account switching – what’s the relationship?

Since the Current Account Switch Service was launched in 2013 the service has helped over seven million people and small businesses move to bank accounts that better suit their needs. The research that Pay.UK have done in the last eight years has helped them to understand why people switch and why some people don’t.

Working with the Competition and Markets Authority during their review into retail banking led Pay.UK to have a special focus on the groups of people who could benefit most from changing their bank account, but who are least likely to do so: those aged 18 to 24, the financially vulnerable and small businesses.

The other group who are likely to benefit most, and therefore required focus, were people with “High Credit Balances”, representing people with an average current account balance of over £15,000, seven percent of all current account customers.

People with this amount of money in their current account wouldn’t be on the top of everyone’s list of people who need help with their banking. However, understanding more about this group of current account holders and what their priorities are when choosing a current account helps us to complete the picture of how switching works.

Pay.UK wanted to understand three things from the research:

Do people with high credit balances consider switching?
How does their awareness of the Current Account Switch Service compare with other people?
Are there distinct features that make their behaviour different from other people considering switching and are these factors things we need to consider?

More: Current account balances and current account switching – what’s the relationship?

Protecting access to cash

No alternative text description for this image

There has been much coverage over the past week on banks committing to new measures to protect access to cash - it seems very appropriate to quote the Access to Cash Chair, Natalie Ceeney on this landmark agreement:

Today’s announcement should ensure cash remains viable for those who need it. Delighted to have been able to broker this landmark agreement.

We’re announcing today that all of the major retail banks have signed up to a new framework. Whenever a service closes (a branch, an ATM) the needs of that community will be independently reviewed – by LINK. If the review determines a service is needed, then that service will be deployed, from a range of shared services including ATMs and shared Banking Hubs. The commitment starts today – with the announcement of the locations for 5 new Banking Hubs, 11 new ATMs, and with the Post Office committed to enhancing the banking facilities at a further 20 (or more) sites.

This framework was developed on a voluntary basis by the banks and leading consumer groups – and is a brilliant result for consumers and small businesses alike. The new services now available to be deployed were piloted this year in 8 communities across the UK. Results also published today.

Pay.UK – the next step in Bacs’ evolution

It was my privilege to have been the custodian of the UK’s Bacs, Faster Payments, CHAPS and Current Account Switching Service systems - here’s a chance to catch an interview with the current custodian at Pay.UK, Dougie Belmore:

Pay.UK – the next step in Bacs’ evolution

ICYMI

Issue 222: Keep it real like Ian Beale
Issue 221: Payments industry and regulatory round up
Issue 220: Cash 101

In brief

BNPL corner

Barclays to offer instalment payment plans with Amazon

Repayment problems mount as BNPL surges

New research by financial advice service OpenMoney finds almost three fifths (57%) of adults aged 18 to 50 have now used buy now, pay later schemes (BNPL), up from half (49%) last year.

The largest rise in usage has been among 45 to 50-year-olds, where 16% growth in the last year makes it the age group most likely to choose the payment method, with 58% having done so compared to 56% of those aged 18 to 24 - contradicting the belief that it is largely a tool for youngsters.

The survey, among 2,000 UK adults found that the most frequently bought items using BNPL are laptops, phones and other tech items, followed by clothes and holidays.

Two fifths (41%) of respondents said they use it because they can’t afford to pay for an item in one go, double the number who feel it makes financial sense to spread the cost (20%). Among 45 to 50-year-olds, those who use BNPL because they can’t afford an item upfront increased by 20% on last year.

Concerningly, those struggling to pay off their BNPL debts has also risen, from 38% last year to 43% this year and one in three (29%) users have turned to friends and family for help with repayments - an increase of 10% on 2020 figures - while seven percent took out a loan and five percent used a credit card to pay back the money.

Many more people will be using BNPL to finance their Christmas purchases, without necessarily considering how they will make the repayments or fully understanding the consequences if they don’t. One in six of our respondents didn’t even class BNPL as debt. The sooner these schemes are regulated and brought in line with the consumer protections required for other forms of unsecured debt, the better.
Hayley Millhouse, managing director of OpenMoney

More: Repayment problems mount as BNPL surges

Podcast: BNPL Regulation: What’s on the horizon?

Check out the newest and final podcast episode of the year brought to you by The Payments Association, where they explore how widespread Buy Now Pay Later (BNPL) is in the UK and whether it is a viable market. Listen to the podcast here: https://okt.to/kFcnjz

Longer read: That A2A Thing Again

In his blog “In the future, every will be famous for 15Mb” Dave Birch has been updating his shining on Account to Account (A2A) payments.

Suggesting that “cardmageddon” may be closer than we think Dave starts his blog with a definition:

Account-to-account (A2A) payments are payments that shift money from the payer’s bank account to the payee’s bank account through the instant payment networks that are springing up around the world. These are inexpensive, push-only credit transfers that complete (for consumers and businesses) in seconds whether the underlying settlement networks are actually real-time (as in Australia) or net (as in the UK).

In the future, everyone will be famous for 15Mb

That A2A Thing Again

Dateline: Woking, 19th December 2021. (This is a revised and slimmed down and updated version of a piece that appeared here on 19th November 2021.) Account-to-account (A2A) payments are payments that shift money from the payer’s bank account to the payee’s bank account through the instant payment networks that are springing up around the world. These are …

14 hours ago · David G.W. Birch

Help grow Payments:Unpacked’s audience

Don’t forget to subscribe

Each week hundreds of people access Payments:Unpacked by clicking on a social media post link - why not subscribe (there is a free option!) and make sure you see each edition of the newsletter.

…and share