Stop me if you’ve heard this one before: Variable recurring payments (VRP) are set for a breakthrough, and will challenge traditional payment methods like cards and direct debit for all your repeat payment needs. In short, anywhere you typically have your card on file for a payment (energy bills, subscriptions, one click checkouts etc.), with VRP you will soon have the option to use Bank on file instead.

Yes, we’ve had the occasional false dawn with VRP, but recent developments — both in the UK and further afield — have dramatically solidified the future picture of VRP, and 2025 is shaping up to be the biggest leap forward we’ve seen since VRP first emerged in 2021.

Major FCA milestones show real change is in motion

While Bank on file (VRP) is not yet supported by the market or regulation, we’ve now had the biggest signal yet that the UK regulators are ready for this to change, thanks to two major milestones.

First, in a letter to the Prime Minister, Chancellor and Business Secretary at the start of 2025, the FCA identified the expansion of Pay by Bank as a way it could use regulation to boost UK economic growth, and specifically outlined the choice and competition Pay by Bank can bring to merchants and consumers.

Then in February, the FCA tasked Open Banking Limited to create an independent operator to support the rollout of this new way to use Pay by Bank, citing financial services, utility providers and government as in-scope for initial use cases.

Why do we need Bank on file?

Bank on file is a better way for both consumers and businesses to do recurring payments. For consumers, it’s about having greater control over regular payments, letting them control exactly how much is paid at one time or over the course of a month, reducing the risk of unexpected expenditure, or an expired card risking an important unpaid bill or late fee.

According to the FCA’s own research 7.4 million consumers feel burdened by bills and credit commitments, and 5.5 million have missed payments in the last 6 months. The flexibility built into Bank on file gives consumers more certainty of what will leave their account when, which also means fewer failed or bounced payments for merchants.

Added to this is the improved payment matching — meaning fewer misdirected payments — and both consumers and merchants get added assurance that payments go exactly where they are meant to go.

The other major benefit, which helps all parties, is immediate settlement, unlike Direct Debits, with which payments run on three-day cycles and can take up to three days to settle. Consumers know what they’ve paid and when, and merchants get that money straight away, which helps them better manage their cash flow.

Again, unlike direct debit, merchants know as soon as any mandate is cancelled, rather than simply finding out when the payment fails. And recurring payments require less manual admin than several individual ad-hoc payments. This all means greater back-end efficiencies.

Are banks on board, too?

While there is currently no regulation to force banks to support VRP beyond sweeping, the FCA wants to see the industry collaborate to develop a ‘sustainable commercial model’. A commercial model will incentivise banks to support new features by including them in the revenue distribution. This commercial model will be enabled by an independent central operator, funded and run by banks and third party payment providers.

While there is still work to do when it comes to VRP, the FCA’s clear intention to accelerate the commercial use cases that would benefit merchants and consumers alike, shows 2025 will be a major step forward.

And to level the playing field fully with cards, use cases will need to be expanded even further in 2026, unlocking regular payments for subscriptions and ecommerce, for example.

Check out our Bank on File cheatsheet below for a list of potential use cases ↓

Your Bank on file use cases cheatsheet:

If Bank on file could transform the way you collect recurring payments, reach out to speak to one of our payment experts today.