Variable Recurring Payments (VRPs) in the UK and SEPA Request-to-Pay (SRTP) in the EU are modern payment methods built on open banking infrastructure. They represent a significant evolution from traditional recurring payment systems like Direct Debit, offering greater flexibility, security, and control for both businesses and consumers.

These systems are designed to handle payments that vary in amount or frequency, which is a common requirement for subscription services, utility bills, and usage-based pricing models.

• Variable Recurring Payments (VRP): Allows a customer to grant a business ongoing consent to initiate payments from their bank account within agreed-upon limits (e.g., maximum amount per payment, total amount per month).
• SEPA Request-to-Pay (SRTP): Enables a payee (the business) to send a real-time request for payment to the payer (the customer), who must then approve it. It standardizes the end-to-end process of initiating and receiving payments.

While both VRP and SRTP aim to improve recurring payments, their operational flows differ significantly. VRP is a “push” system based on standing consent, while SRTP is a “pull” system based on individual request approvals.

VRPs are often called “sweeping” payments because they move money between a customer’s accounts. The process is initiated once by the customer, who sets the rules for future payments.

1. Consent Establishment: The customer selects VRP as their payment method and is redirected to their banking app to authorize a long-lived consent.
2. Parameter Setting: During authorization, the customer agrees to specific parameters, such as the maximum amount per transaction, the maximum number of payments per month, and an expiry date for the consent.
3. Payment Initiation: When a payment is due, the business uses an API to initiate a payment request against the established consent. The bank verifies the request against the agreed-upon limits.
4. Fund Transfer: If the request is within the defined parameters, the payment is processed instantly via the UK’s Faster Payments Service, without requiring the customer to take any further action.

SRTP is more of a messaging layer that streamlines the request and approval process, making it more interactive.

1. Payment Request: The business sends a payment request to the customer through the SRTP scheme. This request contains details like the amount and due date.
2. Customer Notification: The customer receives a notification of the request, typically within their banking app.
3. Customer Action: The customer can choose to approve, decline, or postpone the payment.
4. Payment Execution: If approved, the customer authorizes the payment, which is then typically executed as a SEPA Instant Credit Transfer.

The flexibility of VRP and SRTP opens up new possibilities for billing models that were cumbersome to manage with older systems. They are especially useful for businesses looking to reduce payment failures and administrative overhead.

• Subscription Services: For SaaS, media, or membership businesses where pricing might change or have add-ons, VRP allows for seamless collection of variable monthly amounts.
• Usage-Based Billing: Companies that charge based on consumption (e.g., utilities, cloud computing, telecoms) can use VRP to automatically collect the correct amount each billing cycle without new approvals.
• E-commerce: SRTP can serve as a secure and efficient alternative to card payments at checkout, reducing fraud risk and transaction fees.
• One-Click Payments: VRP consent can be used to enable frictionless one-click checkouts for repeat customers, improving conversion rates.

Implementing these modern payment systems requires careful consideration of the technical and user experience details. It’s not a simple replacement for Direct Debit.

• Bank and PSP Adoption: While growing, not all banks or Payment Service Providers (PSPs) in the UK and EU fully support VRP and SRTP yet. Coverage can be inconsistent, requiring fallback payment methods.
• Consent Management: For VRP, the primary challenge is managing consent. Your system must track consent parameters (limits, expiry) and handle renewals gracefully. What happens when consent expires or is revoked by the user?
• UX for Authorization: The user journey for granting VRP consent or approving an SRTP request is critical. If it’s confusing or creates friction, customers will abandon the process.
• Retry Logic: How do you handle a failed VRP payment? If the failure is due to insufficient funds, you need a retry strategy. If it’s due to consent being revoked, you must prompt the user to re-authorize. SRTP requests that are ignored or declined also need a clear follow-up process.

Designing robust billing flows for VRP and SRTP is key to realizing their benefits. Focus on clarity for the user and resilience for your system.

The user interface for setting up payments should be transparent and intuitive.

• Clear Limits: When a user sets up a VRP, clearly explain what each limit means. For example, instead of “Max transaction amount,” use “The most we can charge you at one time.”
• Communicate the “Why”: Explain why you need a certain limit. For a subscription that costs £50/month, you might request a £75 limit and explain that this covers potential add-ons or future price adjustments, which they will be notified of in advance.
• Frictionless Approval: For SRTP, ensure the notification contains all necessary information (biller name, amount, reference) so the user can approve it with confidence and minimal effort.

Plan for when payments don’t go as expected.

• Automated Retries: For VRP failures due to temporary issues like insufficient funds, implement an automated retry schedule (e.g., attempt again in 2-3 days).
• Clear Communication: If a payment fails, immediately notify the customer via email or in-app message. Explain the reason for the failure (if known) and what steps they need to take.
• Fallback Methods: Always have a backup payment method on file, such as a credit card, and have a clear process for switching to it if a VRP or SRTP payment fails permanently.

While VRP and SRTP represent the future of recurring payments in the UK and EU, they are part of a broader landscape of billing and payment infrastructure. Managing subscribers, handling different pricing models, and integrating with payment gateways are foundational challenges.

Kinde provides tools to manage the entire subscriber lifecycle, including plan creation, upgrades, downgrades, and dunning management for payment failures. While specific support for VRP and SRTP is not yet detailed, Kinde’s infrastructure is designed to integrate with various payment processors. For more information on Kinde’s current billing capabilities, you can explore the documentation at https://docs.kinde.com/.