Research Highlights Challenges Posed by Outdated Payment Systems in the UK
New insights from GoCardless, a prominent bank payment provider, indicate that antiquated payment systems are placing significant financial burdens on UK businesses. The research reveals that ongoing issues with legacy payment frameworks are costing merchants an average of 3.5% of their total monthly revenue.
Study Findings on Merchant Satisfaction with Payment Systems
The report, titled Revolutionising Recurring Revenue, sheds light on prevalent dissatisfaction among 489 UK business leaders in the recurring revenue sector. Nearly three-quarters (73%) of respondents reported facing continuous challenges related to traditional card payments. Additionally, 42% acknowledged spending over three hours each week managing these issues, including fraud and administrative tasks.
The Potential of Commercial Variable Recurring Payments
To address these challenges, the industry is increasingly turning its attention to the forthcoming rollout of commercial Variable Recurring Payments (VRPs), also referred to as Recurring Pay by Bank. This advancement marks a significant overhaul of the UK’s payment infrastructure and is currently in its ‘Wave 1’ phase, spearheaded by the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR).
High Expectations from the Financial Services Sector
The initial phase of the rollout is concentrating on regulated, low-risk sectors, including utilities, financial services, insurance, and government. Within the financial services sector surveyed, expectations for commercial VRPs are notably ambitious:
- 95% believe commercial VRPs will result in cost savings for their businesses.
- 92% expect the technology to decrease the number of late payments.
- 88% foresee an increase in overall customer satisfaction.
- 52% expressed interest in becoming early adopters of this technology.
Consumer Interest Aligns with Business Expectations
Consumer readiness appears to complement the demand from businesses. A survey of 2,000 UK adults indicates that 38% are willing to adopt commercial VRPs, with this figure rising to 60% among Gen Z respondents. There is particularly strong interest in using VRPs for essential services, as 46% of participants expressed a desire to utilize these payment methods for energy bills, citing enhanced financial control and improved security.
Insights from GoCardless on Payment Innovations
Shaun Puckrin, the chief product officer at GoCardless, highlighted that the era of cumbersome payment processes is nearing its end. He remarked on the clear demand from both consumers and businesses for smarter, bank-led alternatives to traditional payment methods.
Implications for Early Adopters in the VRP Landscape
Puckrin further noted, “As a company devoted to bank payments for 15 years, it is thrilling to witness the industry’s evolution as it advances towards live testing of commercial VRPs. Our solution, Recurring Pay by Bank, is positioned to facilitate effective adoption in this new landscape.” The report suggests that businesses that embrace VRPs early on could gain substantial operational advantages by selecting the right infrastructure partners to minimize risks during the transition.