Accounting Industry

VRP – What is it and how can it help business?

In a world fast moving towards automation and instant service, VRP can start to aide with the transfer of funds.

Firstly, what is VRP?

VRP stands for Variable Recurring Payments, this infrastructure lets clients safely connect authorised payment providers to their bank account to make payments on their behalf to agreed limits. Once the mandate is in place payments can be initiated without the client having to take any further action.

VRPs rely on Open Banking APIs to initiate payments, these APIs offer similar flexibility as Direct Debits but come with lower fees, immediate settlement, reduced risk of fraud and enhanced control for consumers.

Using settlement time as an example, Direct Debits can take up to 3 days to clear and even longer to settle, whereas VRPs settle almost instantly and allow users to see the transaction move almost immediately.

Secondly, B2B and B2C usage are very different.

B2C and VRP we have in place already, want to link your Caxton account to your Caxton personal account it is there and readily available. From as user perspective, once it is in place, it means that loading your Caxton account is as simple as logging and selecting how much you wish to load (within your pre-agreed limits) and confirming, no more searching for the card to double check the CCV!

B2B is obviously very different with higher load amounts/volumes and how account payments are mandated at the bank. Here at Caxton we can see the impact this could have in the B2B space and are working with our counterparties to push for the infrastructure to be in place for this to be deployed as a commercial alternative to the traditional methods.

Why do we see this being an important update in the B2B space? Highlighted below are 5 key areas that we have seen consistently spoken about when talking to companies about this change of technology from a B2B perspective.

Removal of Client Transfer of Funds

By clients setting up VRP to appropriate platforms the transfer of funds from the client to payment provider can be automated. This would mean that if you are processing payments on behalf of your clients you remove the step of advising the client how much to transfer and waiting for it to clear prior to making payments. VRP transfers are almost instantaneous so payments could be transacted from the client to the end payee in a matter of minutes, if not seconds.

Invoice Settlement

In the same vein as the above, if mandated in the correct way, customers could set up VRP and once invoices have been raised the collection from the customer can be automated and pulled using the API technology.

Flexibility

As a set of parameters are agreed on setup, flexible payment can be made on an ongoing basis. This differs from Direct Debits in that payments occur on the same day every month and payees must be given written notice if the timing or amount changes.

VRP would mean payments within the agreed parameters could be made on a continuing basis.

Security

VRP must be set up via a secure, online consent journey through the online banking system. There is no sharing of personal information, i.e. bank details or card numbers, like other methods.

Transparency

Simple oversight of the mandate and payment parameters are available through banking apps, this will detail the amounts that are authorised to be taken and an end date can also be set.

This differs to other methods where you can see the date and amount taken previously but no other information.

As mentioned, the team here at Caxton are working with our partners to bring this technology over to the B2B space. We would welcome your feedback and use cases for this as the more evidence we can pass to our partners the more they validation they have to show the banks that this development is needed in the B2B space.

Caxton Payments

Caxton Payments is an alternative to traditional banks, established over 20 years, we help businesses make faster payments more reliably. We offer streamlined processes, automation through API and a collaborative solution to complex payment issues all from a single platform. Our payment capability extends from business expense management, to payroll payments, supplier payments, and currency risk management. We also offer personal prepaid travel cards and international money transfer.