FCA, PSR and CMA deprioritise enforcement action for VRPs

On 20 January 2025, the FCA and PSR published a "prioritisation statement" which confirms that they will not open investigations under Chapter I of the Competition Act 1998 (CA98) into the pricing arrangements proposed by the UK Payments Initiative (UKPI) in the context of Wave 1 / Phase 1 of its commercial Variable Recurring Payments (VRPs) scheme – an innovative payment method enabled by Open Banking.

What you need to know

• VRPs are a form of Open Banking-enabled payment that enable customers to authorise trusted third parties to access their bank accounts and manage recurring transactions on their behalf (for example, to pay utility bills).
• The Competition and Markets Authority (CMA) has confirmed that it will adopt the FCA's and PSR's approach as set out in the prioritisation statement. 
• This is only the second time that UK competition regulators have published a prioritisation statement (the first statement was published by the CMA in 2023 and confirmed that the CMA will not prioritise enforcement action against competing drug firms in relation to commercial negotiations to make combination therapies available to patients, through the NHS).

The National Payments Vision (NPV) sets out the UK government’s ambition for a trusted, world-leading payments ecosystem delivered on next generation technology. Open Banking, which enables customers to pay for goods and services directly from their bank account, is expected to play a vital role in delivering the NPV. 

VRPs are an innovative form of Open Banking-enabled payment that allow bank customers to give trusted third parties secure, recurring, access to their bank accounts to manage payments on their behalf. At present, VRPs are primarily used by banks for internal account-to-account transfers (for example, recurring payments from a current account to a savings account), and VRPs are estimated by the FCA to account for around 16% of all Open Banking transactions in the UK. Commercial VRPs, which extend this model to enable bank customers to authorise trusted third parties to manage recurring transactions (for example, to pay utility bills), are widely regarded as an important next step in the development of Open Banking and in the delivery of the UK government's ambitions in this area.

The FCA and PSR consider that, to achieve this objective, commercial VRPs "must be adopted by a critical mass of the payments industry, merchants and consumers". In this context, the FCA and PSR have worked closely with industry, including UKPI, to accelerate the development of VRP schemes and facilitate the rollout of VRPs. 

The operation of commercial VRPs requires Account Servicing Payment Service Providers (ASPSPs) to provide Payment Initiation Service Providers (PISPs) with API access to bank accounts to initiate payments on behalf of payers. Under the UKPI scheme, participation by ASPSPs and PISPs will be governed through a multilateral agreement, and PISPs will pay ASPSPs a centralised access fee for API access. UKPI will be responsible for setting the centralised access fee which will be set at a level designed to incentivise participation and to achieve a sustainable commercial model for the scheme to operate effectively and deliver the expected consumer benefits.

A key question for such an arrangement is whether a payment scheme built around a centralised and mandatory access fee set by UKPI would attract scrutiny from competition regulators.

The payments sector has long attracted the attention of competition enforcement authorities worldwide. In the mid-2000s, the UK Office of Fair Trading (the predecessor to the CMA) opened investigations under Chapter I of CA98 (the prohibition on anti-competitive agreements) into the rules adopted by card scheme operators in respect of centrally set multi-lateral interchange fees (MIFs) payable on card transactions. Similar investigations were subsequently pursued by antitrust regulators in a number of jurisdictions, including the European Commission. 

The MIF investigations (and subsequent private damages actions, many of which are ongoing) have cast a long shadow on businesses seeking to launch innovative new payment schemes and wishing to ensure that they do not face enforcement action under the Chapter I prohibition. In principle, an agreement that is capable of restricting competition may be exempted under section 9 of CA98 provided that, among other things, the restrictions of competition are indispensable to the attainment of the economic or technical progress generated by the agreement and consumers receive a fair share of the resulting benefits. However, in practice, it is often difficult for businesses to satisfy themselves with sufficient certainty that these exemption conditions will be met, particularly in complex or novel markets. 

On 20 January 2025, the PSR and FCA published a prioritisation statement confirming that, having considered their established prioritisation principles applied when deciding whether to open an investigation, they do not intend to prioritise an investigation under Chapter I of CA98 in relation to the centralised pricing arrangements proposed for the UKPI commercial VRP scheme.

The prioritisation statement refers to the following supporting factors:

• the policy direction under the NPV and support for an industry-led commercial model, which recognises that a centrally set price would support adoption of the VRP scheme at scale, thereby ensuring its viability and delivering benefits to consumers and merchants (which include greater choice, flexibility, and competition in payment acceptance);
• anticipated legislative developments for Open Banking commercial models, including under the Data (Use and Access) Act 2025 (DUAA), where enforcement by the FCA or PSR at this stage could risk pre-empting legislative developments and hinder regulatory progress and broader policy objectives while unnecessarily diverting resources;
• safeguards and conditions that will be embedded in UKPI's governance documents that ensure (i) the access fee is determined by an independent pricing committee and without undue influence from scheme participants, (ii) pricing decisions are made guided by pricing principles agreed with the FCA / PSR, (iii) robust safeguards relating to competition law risks, including ensuring that competitively sensitive information is not shared between competitors, (iv) anti-circumvention measures, and (v) a provision to update the FCA and PSR regarding any changes to the pricing arrangements; and
• the limited scope and relatively low transaction volumes that are anticipated as part of "Phase 1 / Wave 1" of UKPI's commercial VRP scheme, which will be limited to "lower risk" use cases (such as regulated financial services, regulated utilities, local and central government). The FCA and PSR therefore anticipate that any detrimental impact as a result of the VRP scheme is likely to be limited compared to the scheme’s anticipated benefits.

It is important to note that the prioritisation statement is not a decision on whether or not the pricing arrangements under UKPI's commercial VRP scheme infringe competition law. The decision by the FCA and PSR not to prioritise enforcement applies until the earlier of the implementation of the relevant legislative framework under the DUAA (or another appropriate legislative mechanism), or July 2027. The prioritisation statements also confirm that the FCA and PSR reserve the right to revisit their position and open an investigation should there be material changes to the arrangements or if new relevant information comes to light.

On the same day, the CMA published a letter confirming that it does not intend to take a different approach to the FCA and PSR on prioritisation under CA98. The CMA's letter acknowledges the FCA’s and PSR’s sector expertise and their leading role in the development of Open Banking and emphasises the importance of regulatory certainty in supporting pro-competitive industry collaboration.

The CMA has previously recognised that perceived concerns about infringing competition law and enforcement action can act as a barrier to innovation. In November 2023, the CMA published a prioritisation statement to ensure that competitors seeking to negotiate agreements that would make new combination therapies available on the NHS would not face enforcement action from the CMA (provided that certain market features are present and certain conditions are met).

It has remained an open question whether the CMA or other competition regulators would be prepared to adopt prioritisation statements in other sectors, such as financial services. The prioritisation statement by the FCA and PSR (and the related CMA letter) in relation to commercial VRPs is, therefore, a significant development that potentially opens the door to future to pro-competitive industry-led collaboration initiatives.

Prioritisation statements are likely to remain the exception rather than the rule and could be confined to circumstances in which competition law enforcement intersects closely with UK public policy objectives. Both commercial VRPs and combination therapies are examples of cases in which competition regulators have faced political or lobbying pressure to ensure that a perceived concern around enforcement action does not undermine wider public policy objectives.

However, the FCA and CMA have publicly stated their commitment to encouraging pro-competitive collaboration in recent years. The FCA has, for example, encouraged financial services firms to participate in its 'Regulatory Sandbox' initiative, which includes giving firms informal guidance, waivers or modifications to rules where appropriate, helping them understand their regulatory obligations and how to comply with them. The CMA has also been increasing vocal in its support for industry collaboration, including through its publication of guidance on environmental sustainability agreements (see our March 2024 briefing) and having recently announced that it is "stepping up action to enable legitimate, pro-growth collaboration" in its draft Annual Plan for 2026–2027 and 2026–2029 strategy.

Other author: Yasmin Majewski, Trainee