July 01, 2022

What the VRP sweeping definition changes means for your business

Quan Nguyen

How people pay for things is changing rapidly and account-to-account payments, embedded across online experiences, are the future. Variable Recurring Payments (VRPs) have the potential to help account-to-account open banking payments become the norm in the UK. 

VRPs are recurring payments, similar to direct debits, from current accounts via open banking. What’s different about VRPs is they enable consumers to approve transactions that vary in amount from month-to-month, making them particularly useful for payments like a monthly gas and electric bill. To help build on the early success of open banking payments, we’re working with the nine largest UK banks to help test and implement VRP API features, solving for a broader set of challenges. 

The first feature we’re developing is sweeping, which is the automatic movement of funds between two accounts with the same owner. Examples of sweeping include automatically moving funds between current accounts to avoid overdraft fees or to take advantage of better interest rates. Sweeping can also be used to automatically trigger loan repayments when account balances exceed a certain amount, or to save for that next big trip.

 The use cases that fit within the scope of sweeping include:

  • Intelligent savings: VRPs can encourage savings through sweeping, whereby money automatically moves from an account with excess funds to another current (with higher interest) or savings account. This is perfect for those building Wealth-Tech solutions who offer current or savings accounts, like Moneybox. 

  • Smart loan and credit repayments: VRPs can also be used to help with overdrafts and loans. This will allow users to automatically pay off their outstanding overdraft in one account from another account with a positive balance. Lenders and credit card issuers can also use Plaid’s data products to select the optimum amounts and timing for users to repay.

  • Automated financial goals: End users can set financial goals, and fintech applications (using Plaid’s VRP solution) can automatically transfer funds via sweeping to help end users reach those goals.

Are you curious about our work to help develop VRP and if it’s a fit for your business?  Reach out to our sales team by clicking the contact sales button below.

For more details on the definition, a summary of the sweeping use cases as defined by the Competition and Markets Authority (CMA) as of the date of this blog post: 

Within scope

  • Sweeping between current accounts to avoid overdrafts.

  • Sweeping to accounts used for unbundling overdrafts from current accounts and other alternative forms of credit that closely compete with overdrafts.

  • Sweeping to accounts which are used for loan repayments as part of a service that provides alternative forms of credit to an overdraft.

  • Sweeping to credit card accounts.

  • Sweeping to interest paying cash savings accounts.

Out of scope

  • Sweeping to make e-commerce purchases.

  • Sweeping to accounts used for the purchase of cryptocurrency and other similar assets. 

  • Sweeping in order to use online gambling and gaming services.

  • Sweeping to accounts used for foreign exchange or international money transfer services.

Further clarification:

  • E-money accounts that are used by consumers and SMEs as substitutes for current accounts – these are considered to be within scope and reflective of the objectives of the Open Banking remedy.

  • Investment products (including pensions) that may be used by consumers as alternatives to savings accounts – these are considered to be out of scope. For the avoidance of doubt, cash savings are included as noted above.