Variable Recurring Payments (VRP)

Here are the attributes of Variable Recurring Payments (VRP) using a Real-Time Payments (RtP)  integrated with Real-Time Payments (RtP) and FedNow, leveraging Open Banking frameworks:

1. Instantaneous Real-Time Settlement:

• Real-Time Payments (RtP) and FedNow ensure that payments are settled instantly, offering immediate fund transfers and confirmation between the payer and payee.
• This real-time capability eliminates the delays associated with traditional systems (e.g., ACH), providing merchants and customers with up-to-date financial information.

2. Request for Payments (RfP) Automation:

• With RfP, merchants or service providers can send a Payments request automatically to the payer, prompting Payments based on pre-authorized recurring consent.
• This automates the initiation of recurring payments, reducing friction for both the payer and payee, as the Payments happens without manual input once the consent is given.

3. Dynamic Payments Flexibility:

• VRPs using RtP support variable Payments amounts and frequencies, offering flexibility for businesses that deal with fluctuating invoices or usage-based services (e.g., utilities, subscriptions, pay-as-you-go models).
• Customers set a pre-approved range of amounts and frequencies, allowing businesses to collect variable payments while ensuring payments remain within agreed-upon limits.

4. Consent-Based Payments Authorization:

• Customers must provide explicit consent for VRPs, including parameters such as maximum amount per transaction, frequency, and validity period.
• This consent framework, driven by Open Banking, provides customers with full control and transparency over their recurring payments and allows them to revoke or modify their consent at any time.

5. Real-Time Notification and Transparency:

• Both payers and payees are notified in real-time when a Payments is processed, providing immediate feedback and transparency for every transaction.
• The real-time aspect also ensures that both parties have instant visibility into the status of the payment, which improves financial tracking and accounting.

6. Secure and Compliant Transactions:

• Payments made through RtP and FedNow systems adhere to Strong Customer Authentication (SCA) and robust security protocols, including encryption and tokenization, ensuring secure transactions.
• The use of Open Banking frameworks ensures that payments comply with regulatory standards like PSD2 (in Europe) or local financial regulations, safeguarding customer data and privacy.

7. 24/7/365 Availability:

• RtP and FedNow operate 24/7, meaning that payments can be processed and settled at any time, including weekends and holidays, ensuring always-on availability.
• This is particularly advantageous for businesses needing consistent Payments processing without disruption, regardless of traditional banking hours.

8. Lower Transaction Costs:

• Payments via RtP and FedNow typically incur lower transaction fees compared to traditional card networks or ACH transfers, making VRPs more cost-effective for businesses, especially for frequent recurring payments.
• Eliminating intermediaries like card networks reduces processing time and costs for merchants.

9. Reduced Payments Failures:

• Because payments are processed in real-time, the system ensures that funds are available at the time of transaction, reducing the risk of Payments failures compared to batch-based systems like ACH or direct debit.
• This ensures higher success rates for recurring payments, improving Payments reliability for businesses.

10. Instant Cash Flow for Merchants:

• Merchants benefit from immediate access to funds upon successful payments, improving cash flow management and liquidity.
• This is particularly beneficial for small businesses or companies with frequent recurring payments, as it allows them to allocate funds immediately without waiting for batch settlements.

11. Efficient Payments Reconciliation:

• The integration of VRP with real-time payments allows for automatic and real-time reconciliation of payments, as payments and confirmations occur simultaneously.
• This reduces the administrative burden on businesses and ensures that financial records remain accurate and up-to-date.

12. Enhanced Customer Experience:

• By leveraging VRP with RtP, businesses provide a frictionless Payments experience for customers, who no longer need to manually approve each transaction after the initial consent.
• This improves customer satisfaction and retention, as the recurring payments process becomes smooth and hands-free for the payer.

13. Support for Various Use Cases:

• Subscription payments: Automatic recurring payments for subscription services (e.g., media, SaaS).
• Utility billing: Variable recurring payments for utilities or services with fluctuating charges.
• Loan or debt repayment: Dynamic and flexible payments for loans or financing agreements based on changing terms.
• On-demand services: Pay-as-you-go models where payments vary depending on usage.

14. Regulatory and Compliance-Friendly:

• VRP using Open Banking, RtP, and FedNow ensures compliance with regulations like PSD2 in Europe or other local laws governing financial transactions and consumer protection.
• Strong customer authentication and the right to revoke consent at any time provide an additional layer of security and regulatory adherence for customers.

15. Scalability for Businesses:

• RtP and FedNow offer scalability for businesses handling a large volume of recurring payments, making it ideal for industries with high transaction volumes.
• The real-time, flexible nature of VRPs allows businesses to grow without worrying about delays or inefficiencies in Payments processing.

By integrating VRP with RfP into Real-Time Payments (RtP) or FedNow, businesses can offer a more efficient, secure, and flexible recurring Payments solution, improving cash flow, reducing costs, and enhancing the customer experience.