FCA to deliver VRP, Open Finance in 2025 to ‘support growth’ in the UK

The Financial Conduct Authority (FCA) has told the Prime Minister and Chancellor that it intends to introduce variable recurring payments (VRP) in 2025 to increase “competition and choice”, and has also committed to developing Open Finance.

Nikhil Rathi, chief executive of the FCA, has written to Prime Minister Keir Starmer and Chancellor Rachel Reeves with “a new approach to ensure regulators and regulations support growth”.

The letter from Rathi is in response to a government call for regulators to support growth, sent by the Prime Minister on 24 December 2024.

Rathi began his letter by stating: “We want to collaborate with you in a fundamentally different way to support the growth mission. To achieve the deep reforms necessary, your acceptance that we will take greater risks and rigorously prioritise resources is crucial.”

UK Prime Minister Keir Starmer

Rathi called growth “a cornerstone of our strategy, through to 2030”.

He stated that, as other countries pull ahead, the UK needs a financial services digital infrastructure plan “to dovetail with your ambitious AI plan”.

“We stand ready to play a leading role, embracing a digital first approach, and with our work spearheaded by a new Executive Director for Payments and Digital Finance who will also lead the Payment Systems Regulator,” Rathi wrote.

Alongside delivery of the National Payments Vision, in 2025, the FCA has promised to “go further” and work with the PSR to introduce a new Open Banking payment method, VRPs, thereby “increasing competition and choice”.

In addition, the FCA will use powers anticipated under the Data (Use and Access) Bill to develop Open Finance, “potentially prioritising SME lending”.

The FCA’s letter also set out areas where further government action “could enhance our collective efforts”, including digital identity authentication/verification, which Rathi wrote “could unlock huge gains”.

Industry reaction

Francesco Simoneschi, chief executive officer of TrueLayer, said: “We are pleased to see the FCA commit to delivering variable recurring payments in 2025, in response to the Prime Minister’s request for pro-growth ideas.

“By replacing direct debit and card-on-file payments, VRPs will provide merchants and consumers with a flexible instant payment method which will address payment delays and card fraud, while significantly reducing merchant costs and consumer fees – such as overdraft or failed payment fees.”

In a post on LinkedIn, Huw Davies, co-founder and chief executive officer of Ozone API, said the letter “outlines a clear intent to go further than the recently published National Payments Vision”, with its commitment to “drive” variable recurring payments and deliver Open Finance.

“These two initiatives will absolutely act as a direct stimulant for economic growth in the UK. This level of purpose is what we’ve been missing for a number of years since the initial implementation of Open Banking in the UK. It’s great to see,” wrote Davies.

Last week, the PSR published a mid-term review of its five-year Strategy, in which it committed to working closely with the FCA to take forward work on the overall framework for commercial Open Banking payments.