Good afternoon, I’m Chris Hemsley, Managing Director of the Payment Systems Regulator.  

Unlocking account-to-account retail payments is a key component of our 5-year strategy. We want to increase competition in retail payments to deliver better outcomes for consumers and businesses, and expanding VRP is a key step on this path. 

The speed and progress at which payments have developed to where they are today is unprecedented and perhaps somewhat unpredicted. We continue to see payments evolving and adapting to different needs.   

It is this speed of progress that I’d like to focus on, how have we got here and what is the path ahead. 

Potential of VRP  

We see significant potential in the development of open banking to deliver new ways of using payments to benefit consumers. Services like VRP will benefit consumers by giving them more control and flexibility to manage their payment schedules.  

Insight from recent consumer research we commissioned reflects this. When people were asked about current bills and regular payments, more than two-fifths (43%) say they want ‘greater control over when I pay and how much’ and believe that VRP will help with that.  

The cost of living crisis means that more control over payments can be really important at the moment, especially to those struggling with cost-of-living pressures, and for those who can’t access current payment options or they don’t work as well as they should. 

The research also showed that younger people (aged 18-34), those with low financial resilience, those with fewer savings and those who may be more in debt, are more likely to say they would use flexible payment options. 

We also see the opportunity for VRP to support businesses to innovate and compete, to offer great payments experiences to their customers and for savings to be made from the cheaper costs of acceptance and reconciliation.   

JROC’s role in providing leadership and supporting collaboration 

So, we see the potential there, but how do we achieve it?  

JROC, the committee I co-chair with Sheldon Mills, is focused on providing the leadership to deliver the vision and roadmap for the future of open banking.  

In April, we published our recommendations for the next phase of open banking 

These recommendations – which we are now seeking your views on – include detailed proposals for the design of the future entity for open banking in the UK, covering its structure, governance, and funding. This will be crucial for effective oversight of new payments and data markets and to provide clarity to participants, allowing open banking to unlock its future potential. 

It also includes proposals on how to move to a new interim entity quickly – providing a new home for growth and new use cases for Open Banking. We will then move these functions to a more enduring, long term model of the future entity. 

We want to widen out funding for this interim entity from the CMA9 to the largest open banking participants in the UK, including ASPSPs and PISPs.  

The consultation also sets out our view that there should be a dedicated board that can act independently of any one set of interests, with knowledge and representation that reflects the whole ecosystem, including TPPs, PISPs, ASPSPs,  consumers and businesses. 

I would like to take a moment to recognise the collaborative way in which the industry has worked to reach this point.  

The work led by the UK Finance on model contractual clauses, helps keep up the momentum and collaboration, from last year’s VRP and Future Entity Working Groups to drive open banking forward. 

We realise that open banking is a significant change for our ecosystem and therefore it will take a shared commitment from all of us to collaborate, work at pace and deliver.  

More work is needed before we can achieve our shared goal of getting open banking on a sustainable footing which enables innovation and competition across the ecosystem, backed by an appropriate regulatory framework. This framework is crucial to provide effective oversight of new payments and data markets and provide clarity to participants, allowing open banking to unlock its future potential. 

Shared Consensus 

Over the last couple of years, we’ve been working with the wider ecosystem through two Working Groups, to understand and overcome blockers to innovation and help solve outstanding challenges. This has helped reach broad agreement on a number of important matters.  

In particular, there is broad industry agreement on three key areas – that the Phase 1 use cases (utility bills, payments to central and local government and more financial transfers) should be easier to implement due to existing functionality within the system and existing sectoral and legislative user protections. This means we can open up VRP without opening up complex consumer protection issues. 

The second is that some functional improvements are needed to help enhance consumer understanding and improve information flows to billers during the payment journey.  

And finally, that there is a need to better support customers when something goes wrong with a payment through the establishment of robust dispute processes.  

This represents a good basis on which to make progress. Indeed, the broad support for things like dispute resolution processes points to an opportunity to get on with these areas of work while we work through some of the outstanding issues which are traditionally, and understandably, more difficult to achieve without support from parties independent from the market. We can run things in parallel, without the risks of delaying work. 

As you might expect with such a diverse ecosystem, there were some areas where there was no consensus and instead, we heard significantly different views on how best to move forward and where we think as an economic regulator we can add substantial value. 

There are different views on how prices should be set. Open Banking payments – including VRP – are intended to bring an injection of more competition, innovation and change. It is, therefore, to be expected that different stakeholders – existing participants and new entrants, small vs large, end users and suppliers – have different views on the right approach. 

One example of this, is the issue of how to secure sufficient participation in VRP going forward. VRP relies on a network existing and will only work if there is sufficient participation from firms, which is why we have looked at the case for requiring participation. All markets – and payment markets are no different here – need rules so that competition can deliver the best outcomes. 

Moving towards a long-term model  

With that in mind we issued a call for views on expanding VRPs in December last year that explored a number of practical ways in which we can move forward on these critical issues. . 

One such issue is how ASPSPs will be compensated for the costs they incur when offering the necessary – indeed essential – services that are required to make VRP work. One thing very clear to me is that the long-term model needs to compensate ASPSPs for these  costs, taking into account their complex commercial models. We cannot run open banking payments on an expectation that efficient firms make losses over time. 

One approach would be to leave the pricing of these services to individual firms – but it would only take one firm to set them at an inappropriately high level to bring VRP to a halt. And by the time we investigate and remedy such harm, the opportunity presented would be lost. 

Similarly, arguments apply to participation by ASPSPs – it might only take one to undermine VRP and the benefits it can bring. Payments are networks and the success of VRP relies on sufficient numbers of customers and businesses being able to use it. 

This is why we think there is a role for us to play to unlock progress on VRPs. 

A critical mass of users is needed to encourage both investment and take up by business and consumers. If you are an energy company with millions of customers, or a SME looking to grow and compete, you will only invest in a new payment offer if sufficient numbers of your potential and current customers can use it. And the customers of one large bank not being able to use a service presents a significant barrier to business adoption. 

Similar arguments apply to the need for coordination on central rules. An alternative approach relying on bilateral agreements could undermine the consistent participation that we need to see to realise the full benefits of VRP. 

Many of you will have heard me talk about the parallel here to telecoms markets. Targeted regulatory intervention has helped build markets that work well there. 

This sort of intervention can, however, take time to get right – setting prices that allow efficient cost recovery, support wider interests and competition. 

Reflecting this – and our desire to move forward at speed – we set out a temporary approach for VRP Phase 1 not to have an ASPS charge. To offset these costs – which we thought were likely to be low – we are removing the FPS charge from the ASPSP. However, this initial approach may need to evolve over time as uses of VRP change. We recognise that different use cases present different risks and costs, and so may require different commercial models. 

While there was some support for this approach – we have heard concerns that this risks setting a precedent that open banking payments might rely on firms not recovering efficient costs. Concerns that I hope my earlier comments help somewhat to assuage. 

Commercial Sustainability 

Commercial sustainability is critically important to create that strong basis for investment which will promote competition. Participants need to be able to recover their efficiently incurred costs, and where there is competition, make a profit if they are good at what they do. This rewards them for investment and innovations that bring benefits to end users.  

We have published some principles about what commercial sustainability means to us as a regulator. Prices should broadly reflect relevant long-run costs, incentivise investment, innovation, and adoption to drive network effects, and be fair and transparent. We recognise that there are trade-offs between these principles that may mean it is not possible to achieve all of them at the same time, particularly early on. 

Our current view is that without targeted intervention, misaligned incentives and account providers unique position in the market will mean that progress will not match the opportunity available.  

At the moment, we don’t have a consensus view across the ecosystem on a commercial model that BOTH delivers competition with other payment methods AND encourages adoption. Across responses to our consultation, we saw good levels of support for some form of centrally set pricing, but little agreement on how this price should be determined or who should set it. 

So, what are the options? We could continue to do nothing and hope the market resolves itself or, – if a model is achieved – will it deliver those good outcomes for all participants across the ecosystem?  

There is the approach taken by the European Central Bank in the Single Euro Payments Area (SEPA) – get consultants in to come up with a price. However,  there are outstanding questions about whether this has delivered a model that people actually want to use  

More fundamentally, is this a very stable outcome that supports investment? If the price coming out of a black box runs counter to our statutory objectives, there is a risk that we review the arrangements and intervene. 

The UK has a payment system regulator. And in the UK economic regulators take these sorts of decisions backed by objectives set by parliament, informed by consultation, independent decision-making, and rights of legal challenge. 

We continue to analyse responses and seek evidence following our consultation and will publish a response this summer.    

I hope that I have been able to clarify our objectives and provide some assurance on what we are trying to achieve. I remain of the view that there is significant alignment on what a long-term commercially sustainable VRP model needs to look like. 

I also hope that I have been able to set out why we set out the proposals we did. If you think we have missed something, it is important that you let us know. If you have a proposal, share it with us and with everyone else. Debate and discussion is the route to better decision-making on these important issues of market design. 


Some important progress has been made so far, but there is still more to do.  

The development of open banking and VRP continues to be fast-paced and agile and delivering changes is important. They require leadership, collaboration and innovative solutions to help reconcile complex trade-offs. With new solutions, we will see more effective competition – and that is an enabler for choice, not only in the tools we might adopt to make open banking payments, but in the essential protections and controls those services will provide.    

2024 will be an exciting year as new requirements and solutions come to fruition. We’ll also continue to keep our eyes on what the future might bring and what, if any, steps we might need to take to further encourage competition and innovation.   

We will champion our industry and the need for new ideas to address the different needs of everyone who makes and receives payments. And we will do so in a way that focuses minds to delivering better outcomes, enhanced competition, and effective ways of protecting people.