VRPs vs Card Payments: The Future of Repayments and Collections
We’re delighted to share an article from our partners, next generation payments platform Acquired.com, which delves into Variable Recurring Payments (VRPs) and the future of repayments and collections.
For fintech businesses, ensuring reliable and cost-effective payment collection is critical. As card payments face increasing costs, failures, and compliance pressures, Variable Recurring Payments (VRPs), powered by Open Banking, are emerging as a transformative alternative. For businesses managing high volumes of recurring payments, understanding this comparison is crucial for optimising revenue collection and reducing operational overheads.
VRPs enable businesses to collect recurring payments directly from customers’ bank accounts under pre-set parameters, such as amount and frequency, without requiring re-authentication for each transaction. The shift from traditional payment methods to VRPs represents more than just a technological upgrade – it’s a strategic move towards more reliable, cost-effective, and customer-centric payment collection.
Comparing the two payment methods
Card payments use the card-on-file model, where customer payment details are tokenised and stored securely for recurring charges. With VRPs, SCA and direct bank connections eliminate the need to store sensitive payment credentials. VRPs generally have lower costs as they bypass Scheme and Interchange fees, and also have reduced levels of chargebacks, fewer payment failures, and minimal fraud prevention needs.
Cards often have higher costs with percentage-based fees for high-value transactions, in addition to costs for fraud prevention tools, chargeback management, and PCI DSS compliance. Cards are certainly more familiar to end customers, but can be prone to issues like expired cards and insufficient funds leading to disruptions and customer frustration.
With VRPs, customers can set up payments seamlessly without entering card numbers, expiry dates, or CVV details. This eliminates manual data entry, reduces the risk of failed payments, and creates a smooth experience from setup through to ongoing transactions.
The Future of Recurring Payments
With VRP transactions growing by 393% over the last 2 years, businesses adopting VRPs early can gain a competitive edge. While card payments remain popular for low-value transactions, VRPs offer lower costs, better success rates, and enhanced customer experiences, making them the future of recurring payments.
The choice between VRPs and traditional payment methods ultimately depends on business specific requirements and customer demographics. However, the evidence clearly favours VRP adoption for businesses prioritising cost reduction, payment reliability, and customer experience enhancement. Financial services businesses, in particular, may benefit from VRPcapabilities due to their recurring revenue models and sophisticated customer bases.
The desire for lower costs, higher success rates, and enhanced flexibility makes VRPs particularly attractive for insurance premiums, loan repayments, and subscription services.
Many businesses find success in offering VRPs alongside traditional payment options, allowing customers to choose their preferred payment experience whilst benefiting from improved collection performance overall.
The payment landscape continues evolving rapidly, but the fundamental advantages of bank-mediated transactions – security, reliability, and cost-effectiveness – suggest VRPs will play an increasingly central role in modern recurring payment strategies. Businesses looking to optimise their payment infrastructure should seriously consider VRPs as part of their strategy.
Want to find out more about VRPs? Get in touch with our partners Acquired.com here
