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Sweeping – What is the No. 1 Open Banking solution that’s helping businesses today?

Newsflash: The UK has, narrowly, avoided recession (so far)! For most businesses, this is no cause to pop open the champagne; rather, it’s good common sense as well as business sense to take stock of where your business is right now and make improvements and efficiency savings where you can.

How? Open Banking payments technology and Variable Recurring Payments (VRP)

There is new technology in the payments space today, specifically, Open Banking, and particular Open Banking payment solutions called Variable Recurring Payments (“VRP”), that are making payments processes, and money transfer requiring manual input to collect and reconcile, a thing of the past…you could say, there are sweeping payments changes afoot(!), meaning automatic money transfer will never be the same again.          

In this blog, we’ll go through:

  • What are Open Banking payments?
  • What are Variable Recurring Payments (VRP)?
  • What are sweeping payments?

What are Open Banking payments?

Open Banking payments are the 21st century way to make a fraud and mistake proof automatic bank transfer. Open Banking payments are a digitally joined up ‘billing business requesting payments through to customer paying’ end to end journey, meaning there is little exposure to invoice interception fraud, and zero chance for customers to input incorrect data in making a money transfer with payments ending up in the wrong place, or lost altogether. Open Banking payment solutions allow businesses to be able to easily send secure messages to their business and personal customers requesting payments, attaching any helpful documents like invoices, track invoices, and receive a correctly referenced and reconcilable automatic money transfer from their customer, in real time, every time.

Open Banking payments are direct bank account to bank account automatic bank transfers. The Open Banking payment journey begins with a business sending a secure ‘request to pay’ message to their customer using an Open Banking provider, like Ordo, which hosts and manages the sending of these messages on its secure platform, white labelled, so the customer recognises the payments requests, and the business branding and messaging is maintained. 

The customer simply clicks the secure tokenised link or ‘pay now’ button or scans the QR code in the text, email, WhatsApp or hard copy letter, and they’ll be guided to select the bank from which the automatic money transfer will be paid. The customer is presented with the payments details such as who’s asking them to pay, how much, by when and for what. All the customer has to do then is authorise payment by clicking ‘pay’ or ‘confirm’, and an automatic bank transfer will be facilitated, instantly, by the Open Banking payments provider, from the customer’s bank account directly to the business’ bank account.

woman using laptop mobile phone online shopping pay by credit card

What are Variable Recurring Payments (VRP)?

We’ve outlined how Open Banking payments work generally; the above Open Banking payment solution description is how single ‘authorise every time’ Open Banking payments work. It is lower cost than taking card payment, and will save businesses time and money because receipt of funds is in real time giving cash flow a boost, and the manual reconciliation required for every non Open Banking money transfer received is negated.

But there’s more to Open Banking payments and the payment solutions it offers than the immediate facilitation of single ad hoc payments making the costly, fraud prone and hard to reconcile automatic bank transfer a thing of the past.

Open Banking payment solutions also accommodate the collection, reconciliation and management of the whole relationship and ongoing payments agreement for repeated payments, like direct debit and subscriptions. And these Open Banking payment solutions are called Variable Recurring Payments (VRP), and one use case for Variable Recurring Payments (VRP) is for so-called ‘sweeping’ payments.

Variable Recurring Payments (VRP) are the management by an Open Banking provider, on behalf of business on a white label basis, of the requesting and collection of repeated payments under one authorisation from a customer. Variable Recurring Payments (VRP) could be for utility bills, payment by instalment for high capital items, or the ongoing payments for a subscription service like entertainment streaming, goods to be delivered or access to venues.

Variable Recurring Payments (VRP) agreements allow businesses to collect those repeated payments under one authorisation, so providing all subsequent payments fall within the parameters agreed between customer and business, those payments can be collected via automatic bank transfer without the customer needing to authorise all payments; Variable Recurring Payments (VRP) are like a smart direct debit or standing order.

Why are Variable Recurring Payments (VRP) smart? Because they have the following advantages over the age-old direct debit:

  1. set up takes minutes, unlike the direct debit which takes weeks;
  2. money transfer is in real time, unlike the direct debit three day clearing cycle;
  3. changes can be made up to the moment the Variable Recurring Payments (VRP) are made, unlike the bilateral payment or cancel options of direct debit.

With Variable Recurring Payments (VRP) comes flexibility, dynamism and control, meaning both business and customer stand to win.

What are Sweeping payments?

Sweeping payments are the first use case for Variable Recurring Payments (VRP) to go live. It is the Open Banking facilitated automatic bank transfer of repeated payments between accounts in the same name, for example: sweeping payments from current account to savings account, overdraft facility, savings account, loan or credit card.

It is sweeping payments, only possible with Open Banking Variable Recurring Payments (VRP), that will give businesses and customers flexibility, control and convenience, along with time and cost savings, helping businesses through tight quarters of 2023 to come.

If you want to know more about how Open Banking payments and Variable Recurring Payments (VRP) for sweeping payments can help your business, get in touch today.