This article is correct in stating the participants in the open banking value chain need to align to make Pay By Bank solutions more user friendly. Regulators and others in the value chain including card payment networks have promoted white lists and delegated authorization to minimize how often consumers are challenged to authorize a payment. However, maintaining white lists and relaying a delegated authority through the payments network to the bank has proven time-consuming to document and harder to implement than expected. That said, the time is now for all payment participants to work towards a common implementation. If they can do that, then Tom Greenwood’s vision for Variable Recurring Payments or VRP can evolve. Granted, there are very real benefits to card-on-file solutions that have yet to be duplicated in the account-on-file construct, so that conversion is likely to take longer than suggested here:
“Variable Recurring Payments (VRPs) are the most significant development in open banking to date. Why? Because they tackle one of its biggest challenges: the requirement for consent via Strong Customer Authentication (SCA) for every transaction.
VRP effectively delegates authentication to a third-party provider (TPP) like Volt, which then enables a single-click payment experience for trusted beneficiaries. This impact is expected to be seriously disruptive to the status quo.
VRP has thus far been mandated for Sweeping use-cases only – this means transactions between two accounts in the same name. Notably, though, in building VRP for that Sweeping use-case, the banks have created the infrastructure needed to support first party to third party transactions.
This will enable customers to use VRP for everything from subscriptions to in-app payments and for e-commerce more broadly. Card-on-file will be replaced by account-on-file; direct debits that are antiquated and with a problematic operating interface are at risk of being consigned to history.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group