Three years ago, TrueLayer argued that the next phase of open banking would not be unlocked by waiting for more regulation, but by banks and fintechs choosing to work together commercially. That argument was rooted in a simple observation: regulation can unlock doors, but only aligned incentives keep them open.

The creation of the UK Payments Initiative (UKPI) shows that this future is now moving from principle to practice. UKPI is an independently governed, industry‑owned company formed by 31 firms - including major UK retail banks and fintechs. Its remit is to turn Pay by Bank into a scalable alternative to cards and direct debit, initially by unlocking variable recurring payments (VRP), on commercial terms that work for everyone in the value chain. 

This is a shift from today. The original competition basis for open banking prohibits banks from charging third party providers, like TrueLayer, for initiating payments. This ‘free access’ has been a huge boost for competition, reducing barriers to entry for fintechs, resulting in many new products and services being developed for consumers and businesses.

But to unlock new features, UKPI will facilitate bank fees for access. This will enable banks to meet the costs of further developing their open banking APIs, and invest in innovation to improve the customer experience and drive adoption. 

As COO at TrueLayer and a board member of UKPI, I see UKPI as the first large‑scale test of a principle that will define the next decade of open finance: if you get the commercial model right, progress follows without the need to regulate and mandate every step. 

VRP: The missing functionality for Pay by Bank 

Variable recurring payments (VRP) have long been cited as “the next big thing” in open banking, a way to bring instant, account‑to‑account payments to use cases dominated by cards and direct debit. In practice, they’ve been slow to arrive for everyday scenarios like subscriptions, utility bills or ecommerce checkouts. 

Today, VRP is limited to sweeping between accounts held by the same person: automating savings, or paying off credit. This is an add-on to the regulatory requirement for banks to provide APIs for payments and data (open banking). Sweeping accounts for more than six million payments every month in the UK; 20% of all Pay by Bank transactions. That is remarkable traction for a product still in its early, policy‑driven phase. It shows that, when the experience is good, adoption follows.

UKPI is designed to take VRP from that policy‑driven phase into a commercial one. UKPI will operate a commercial scheme for recurring payments initially in sectors including utilities, financial services and government, and soon will support much broader use cases, including ecommerce. 

Why the UK Payments Initiative matters for open finance 

The FCA recently published its roadmap for open finance (extending open banking principles beyond banking data, to mortgages, pensions, insurance and beyond). In it, the FCA committed to collaboration with industry ‘on the launch of sustainable commercial schemes’. UKPI is the prototype for this kind of scheme. It will need to crack the economic conundrum of open banking, to demonstrate that commercial schemes are feasible in other sectors.

The problem UKPI is solving:

Open banking regulation requires firms to open up their payments functionality to third parties for free, without contracts. This creates hugely positive conditions for market entry (low costs and complexity for entrants), which enables intense competition and innovation, and the development of new services like Pay by Bank which benefit consumers and businesses. 

However, with this approach, the firms enabling the access via mandated APIs have fewer positive incentives. They must maintain the API to comply. The API is a cost centre and is viewed as such. This isn’t always the case (Natwest, for example, has created ‘Bank of APIs’ and launched its own successful open banking offering) but there is an acknowledgement, including from regulators, that an economically sustainable phase of open banking is needed to allow (and motivate) the ecosystem to scale. 

The commercial model being progressed by UKPI will enable firms to charge a fee for access to payments functionality, allowing them to meet ongoing costs and potentially profit from the service, which becomes a product offering to invest in rather than a compliance exercise. A better service increases adoption and creates a positive flywheel: better product, more users, more income. 

However, if the fee is too high, the open banking providers paying the fee will struggle to sell their services to businesses who want to use open banking payments. Volumes will decrease, and firms charging for access will get less fee income. 

UKPI has been equipped with strong tools to take on this economic challenge. It has an independent pricing committee and has benefitted from extensive input from Frontier Economics on the optimum pricing model for its initial roll-out of variable recurring payments, summarised in this paper.

How the market reacts to the model, and how UKPI manages the reaction, will be the first true test. It's an exciting and important time where we are truly putting principle into practice.