Britain’s Fintech Stumble: Can VRP Help Us Catch Up?

London used to set the global pace in payments: Faster Payments (2008) gave us near-instant transfers years before the US FedNow pilot, and “open banking” legislation in 2018 promised to let any regulated third-party move money straight out of a customer’s current account. Seven years on, the score-card is sobering.

The numbers that tell the story

• 31 million open-banking payments were made in March 2025, a chunky 70 % YoY rise — yet they still represent barely 7.9 % of all Faster Payments and a rounding error next to cards.

• UK merchants processed 1.92 billion card transactions in February 2025 — roughly 60× the open-banking run-rate.

• VC/PE money is drying up: fintech funding fell from £10.95 bn (2023) to £7.97 bn (2024) — a four-year low.

• Flag-bearers are wobbling. TrueLayer’s valuation slid 30 % after layoffs; GoCardless cut 20 % of staff and now talks about profitability “by 2026.”

• Meanwhile, Brazil’s Pix handled ≈64 bn transactions in 2024, 80 % more than all Brazilian card payments, and India’s UPI rang up 18.3 bn transfers in March 2025 alone.

In other words: usage is growing fast, but the gap with cards is widening faster elsewhere.

Why hasn’t Pay-by-Bank clicked here?

1. Product-market fit: Apple Pay and Google Pay have reduced card friction to a single thumbprint. Without a visible step-change in UX, consumers stick to familiar rails.

2. Economic incentives: Issuers collect interchange; gateways and acquirers clip the ticket; shoppers enjoy chargebacks. None of those exist on raw account-to-account (A2A) flows, so the incumbents have no reason to nudge us away from cards.

3. Regulatory spaghetti: A joint FCA-PSR task-force, competing rulebooks (PSD2 vs. UK-RTS), and no single scheme operator left nobody clearly in charge.

4. Trust & awareness: A 2018 YouGov poll showed 73 % of UK adults had never heard of open banking, anecdotally unchanged today. With fraud losses hitting £2.1 bn in 2023, consumers default to the protection they know.

VRP: our second wind or another buzz-phrase?

Variable Recurring Payments (VRP) let a third party pull funds within a consented limit — think direct debit on steroids: real-time, adjustable, and reversible at source. Earlier this month 31 banks, PSPs and fintechs agreed to bankroll a dedicated cVRP operator. March data show 3.7 m VRP transactions already live in the wild — ~13 % of all open-banking payments.

MY TAKE

Unit economics look better than one-off Pay-by-Bank. Recurring flows create predictable take-rates; merchants will gladly share savings if they can turn £0.40 card fees into £0.10 A2A pulls.

Bank alignment is improving. The Treasury folded the PSR into the FCA and reminded the latter of its growth objective. That removes one layer of turf warfare and gives high-street banks a seat (and equity) at the table.

First verticals matter. Utilities, rail and charities — low-margin, high-frequency billers — have real incentive to ditch cards. If VRP nails those, retail could follow.

Investment take-aways

Theme	Rationale	Watch-list*
B2B Pay-tech plumbing	Winners supply the APIs and compliance layers everyone else plugs into.	Stripe Treasury, Token.io, Yapily
Risk & refund layers	Chargeback-like insurance is the price of mainstream adoption.	ChargeAutomation, Salv
Consolidation targets	Sub-scale A2A gateways will struggle to raise fresh equity in a 5 % base-rate world.	TrueLayer (post-down-round), Modulr

*Not investment advice; just names on my own radar.

With UK multiples compressing — Revolut still flirts with a $40 bn valuation but its smaller peers trade at 2-3× NTM revenue — strategic buyers will shop aggressively once the rate-cut path is clearer.

So, is the dream dead?

Hardly. We have:

• 13.3 m active open-banking users (that’s one in five adults).

• A government-endorsed payments vision and a consolidated regulator.

• Talent, capital markets and an investor base that still backed £8 bn of fintech deals last year when most global LPs hid in money-market funds.

But time is short. Pix and UPI prove that instant, low-cost A2A rails can reach mass adoption in four years when regulators mandate participation and the commercial proposition is obvious. If VRP can’t replicate that here by 2027, Britain risks becoming a fast-follower in a race it started.

For my part, I’m positioning for an M&A-led bounce: think rails-plus-risk infrastructure, not flashy consumer apps. And if you’re a founder: stop pitching “kill Visa in five years” — show me a pathway to positive gross profit inside 18 months.