Several banks and fintech firms, under the UK Payments Initiative (UKPI), aim to break Visa and Mastercard’s card duopoly by providing a recurring, open banking, payment alternative.
The UK Payments Initiative (UKPI) has launched a scheme designed to turn open banking payments from one-off payments to recurring, standardised transactions.
Launched at Money 20/20 Europe yesterday (2 June), the scheme will allow the UK government and businesses to accept account-to-account (A2A) open banking payments, such as pay-by-bank, within limits set by the consumer.
Regular and variable recurring payments will become available to the consumer without needing to share sensitive card information or the use of traditional direct debit. Consumers are able to determine how long the permission lasts, how much can be taken, and who receives the payment.
The UKPI is initially rolling out the scheme for payments to be used to charities, the government, financial services, utilities and more.
Providing greater adoption and use cases for open banking payments forms part of the UK government’s National Payments Vision, a strategy to utilise payments as an economic growth driver to bring forth new innovations within the sector by leveraging next-generation technology.
Richard Koch, Managing Director of UKPI, said: “This marks a defining moment for the next evolution of payments in the United Kingdom.
“This is about creating a payment model that works better for everyone, giving people more control and reducing friction for businesses. Our commercial approach will allow us to develop from these first customer journeys to subscription models and wider ecommerce.”
Who is backing UKPI’s new scheme?
The new open banking payment scheme has the backing of several major UK banks and fintech firms, all of which collaborated on designing a standardised framework for consumer adoption.
Some of the UK banks that have backed the scheme and are founding members of UKPI include:
- Barclays
- HSBC
- Lloyds Banking Group
- Monzo
- NatWest
- Revolut
- Santander
The fintech firms that are also supporting UKPI as founding members include Acquired, GoCardless, Plaid, TrueLayer and Yapily.
UK banks and fintechs have established a rule book and commercial model designed to open banking payments automated, flexible and recurring. They are also placing consumer trust at the heart of the scheme, enabling consumers to make real-time disputes for relevant payments.
Participants are also working in tandem to reduce payment costs for businesses with enhanced consumer security.
One participant, Acquired, will apply its commercial variable recurring payments (cVRP) model to support the open banking payment lifecycle. Onboarding consumers using cVRPs will gain an automated process which uses real-time affordability checks for each payment, intending to remove friction from the traditional card and direct debit process.
Greg Cox, CEO of Acquired, said: “For the first time, the industry has a scheme designed to make open banking payments work for recurring use cases at scale.
“As a founding shareholder, Acquired is backing that shift and taking a leading role in the development of commercial VRPs. We believe they can increase choice in UK payments and give businesses a more flexible, secure and effective way to manage recurring customer relationships.”
UK’s first push to challenge Visa and Mastercard?
Another participant, GoCardless, welcomed the push for UK payment rail alternatives to traditional cards after finding that they continue to dominate the landscape but cost businesses £1.5bn in attached interchange fees, primarily from Visa and Mastercard.
Recurring A2A payments are a low-cost alternative and bypass intermediaries like Visa and Mastercard, which do not rely on traditional payment rails and leverage open banking for a faster, more seamless payment experience.
A GoCardless report found that 89% of recurring revenue businesses believe open banking-powered payments will significantly improve cash flow, while 91% expect these payments to reduce associated costs.
With UKPI set to roll out recurring payments over the course of the year, GoCardless revealed 49% of businesses intend to become early adopters and 38% of consumers are willing to attempt their first pay-by-bank transaction, which increases to 60% of consumers from Gen Z demographics.
Shaun Puckrin, Chief Product Officer at GoCardless, said: “For a long time, the UK has been waiting for a genuine alternative to traditional card payments. By launching an industry-wide scheme for recurring Pay by Bank, we will bring real competition to a market that’s been dominated for decades by a costly card duopoly.
“This milestone establishes the UK as a country that owns its financial future. We’re creating a payments infrastructure that is modern, competitive, and free from over-reliance on external networks.”
