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Stronger potential demand for VRPs as cost of living rises in the UK

By Gaia Lamperti

June 07, 2022

  • cost of living
  • Direct Debit
  • FinTech
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digital payment, cross border payment

As the rising cost of living ratchets up the pressure on consumers across the UK, demand for better ways to manage their money with convenience and ease becomes stronger. Many would appreciate quick and easy tools, according to the latest research from direct bank payments firm GoCardless: over a quarter (28%) of consumers indicate they are “too busy” and often lack the time to think about budgeting or managing their money.

The study also pointed out how half of the respondents said they would use new technology that automatically moves their money from one account to another with a higher interest rate (53%) and to have their debts paid (50%). These findings reveal high potential demand for Variable Recurring Payments (VRPs), a form of payment instruction set up to automate a series of future payments. VRPs offer more control and transparency than existing alternatives, such as direct debit payments.

The findings come just weeks before the CMA’s ‘sweeping’ deadline for VRPs, with banks like NatWest already gearing up for the industry-wide rollout. The desire to gain greater control over their finances also comes as consumers are being stung by the worst rate of inflation in 40 years.

“The research shows that VRPs are not just the latest development in open banking technology; they can solve real problems for everyday people,” Duncan Barrigan, Chief Product Officer and Chief Growth Officer at GoCardless, told IBS Intelligence. “Consumers can use ‘sweeping’ to pay down debt or boost their savings account, or even to build up a deposit for their first home through our first VRP customer, Nude. The introduction of these ‘me-to-me’ transactions will help millions of people gain greater control over their finances.”

Against this backdrop, the research reveals that 57% are struggling to save due to the rising cost of living, with more than four in 10 (45%) Brits planning on experimenting with new ways to save or make money over the next 12 months. Younger consumers may require even more support: 30% of Gen Z and Millennials say they find it difficult to budget and manage their money every month, rising to 34% of women in these cohorts.

“It’s easy to see the appeal of sweeping, but it’s the use cases beyond this which are most exciting to me. Further down the road, retailers and other organisations can benefit from the speed, and security of VRPs, not to mention the lower cost compared to cards. We’re already seeing this in practice through our non-sweeping pilot with NatWest Group, helping Charity Right collect regular donations in a seamless way. We predict demand for VRPs to grow as more organisations and payers experience this seamless, secure and efficient form of payment,” Barrigan added.

GoCardless has been active in the VRP space since 2019 when it took the first live transaction through a sandbox developed by the OBIE. Earlier this month, GoCardless announced Nude, the savings app for first-time buyers, as its first VRP customer. It has also been chosen as a payment provider for VRPs by NatWest Group and recently launched one of the country’s first ‘non-sweeping’ VRP pilots with NatWest and Charity Right.

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