Variable recurring payments compared with Direct Debits

A variable recurring payment is a recurring payment set up through open banking, where you connect an authorised payment provider to your bank account so it can take payments that vary in amount. A Direct Debit is an instruction you give a company to collect from your account, usually for bills or subscriptions, and it is covered by the Direct Debit Guarantee¹. The two look similar on a bank statement. They are not the same thing, and the difference matters most when something goes wrong.

Direct Debits remain the backbone of UK bill paying. They were used to make around 7 out of 10 of all regular bill payments, and Direct Debit use increased by 2% to 5 billion payments in 2025, with a forecast of 5.4 billion payments in 2035². Variable recurring payments are newer, narrower and still being tested in a small number of sectors³.

The practical difference for a consumer comes down to three things: how the payment is authorised, whether the amount can change without you doing anything, and what you can claim back if the wrong amount is taken. This page sets out how each method behaves, what sweeping means, and where variable recurring payments are not yet available.

What variable recurring payments are: a 'smart Direct Debit'

A variable recurring payment, usually shortened to VRP, lets you safely connect authorised payment providers to your bank account using open banking so that they can initiate recurring payments⁴. The technology underneath is open banking, the same system that lets budgeting apps read your transactions³. Instead of handing a company your sort code and account number, you give consent through your bank, and the payment provider initiates the payments from there.

The comparison people reach for is a smart Direct Debit, and it is a fair starting point. Both allow the amount to change from one payment to the next. Both are designed for regular commitments rather than one-off purchases. The difference is who holds the authority and what happens when the amount moves.

With a Direct Debit, the company collects under an agreement with its own bank, and the beneficiaries of Direct Debits are subject to careful vetting procedures and are required to give indemnity guarantees through their banks³. That vetting is what sits behind the guarantee. With a variable recurring payment, the authority sits with the payment provider you have connected through open banking, and the protections that come with it are different.

Variable recurring payments are also not the same as a standing order. A standing order is an instruction you give your own bank to move a fixed amount on a fixed date, and the amount stays the same every month, whereas Direct Debits can change⁵. A variable recurring payment can change too, which is why it sits closer to Direct Debit than to standing order in how it behaves.

How a Direct Debit is set up and taken from your account

To set up a Direct Debit, you give permission to a business or organisation to collect money from your account, usually for bills or subscriptions¹. The company arranges it, not you. Direct Debits are set up by the company you will be paying, but you need to provide your name and bank details for them to arrange the payment⁶. That is the reverse of a standing order, which you set up yourself³.

Once it is running, a variable amount of money is taken from your account⁷. That is the point of the arrangement: the company can take a different amount each month depending on how much is due, which is why it is the preferred option for paying bills⁷. Direct debits are often used for mortgage, phone, energy or gas bills³.

The flexibility runs both ways. The main advantage of direct debits is the flexibility, as the payments can vary in amount or frequency³. But the same flexibility means you need to keep an eye on what is coming out. Bounced Direct Debits and standing orders can leave you facing heavy bank charges, so it is worth making sure there is enough money in your account⁸.

You stay in control of the mandate itself. You can set up, amend and cancel direct debits and standing orders, and that is a standard feature of basic bank accounts as well as full current accounts⁹. If a company goes under, the Direct Debit will be cancelled automatically in some cases, such as vehicle tax¹⁰.

A direct debit is set up by the company you are paying, not by you, so you need to give them your name and bank details and they arrange the collection². That is the main difference from a standing order, which you set up yourself and where you keep the power to change the amount³. Because the company collects, the amount can vary from one payment to the next, and payments are usually taken monthly on a date you have agreed⁴.

Card recurring payments are not the same as either

A recurring payment is a payment that you set up with a business using your debit or credit card details¹. It is also called a continuous payment authority, or CPA, or a future card payment, and it is set up by a company using your debit or credit card details instead of your current account details³. The business will ask for your debit or credit card information instead of your bank account details¹¹.

This is the method behind most subscription services, and it behaves differently from both a Direct Debit and a variable recurring payment. Recurring card payments are not covered by the Direct Debit Guarantee¹¹. Payments made by CPA are not covered by the Direct Debit guarantee, but the law offers you similar protections¹². That is a meaningful difference in practice: the guarantee is automatic and the bank must refund a mistake, whereas the CPA protections depend on the firm and the circumstances.

There is also a practical wrinkle when your card changes. If you get a new payment card, your recurring payments may continue, but this is not always the case, and you can contact your card issuer to check¹¹. That uncertainty is one reason people end up with subscriptions they thought had lapsed.

If a company stops trading, the picture changes again. If you paid with a debit or credit card, you can still ask for chargeback, but your bank or credit provider might not agree to do it¹³. Chargeback exists for both credit and debit card purchases¹⁴, and it applies to both credit and debit card purchases of any value, through voluntary industry schemes run by Amex, Mastercard and Visa¹⁵. Card providers sign up voluntarily and exact rules may vary between Visa and American Express, so it is not as strong as credit card protection¹⁶.

VRP or Direct Debit: how each one behaves

The clearest way to see the difference is to look at what each one does when the amount changes, when you want out, and when something goes wrong.

On changing amounts, both allow it. Direct Debits can vary in amount or frequency³, and variable recurring payments are built for the same purpose. The difference is the notice and the recourse. If an energy supplier raises your Direct Debit, it should explain why the change is necessary¹⁷. That duty sits with the company because the company holds the mandate.

On cancellation, Direct Debits are straightforward: you instruct your bank, and you can set up, amend and cancel them yourself⁹. Variable recurring payments work through consent given in an app or through your bank, and withdrawing that consent is the route out. The site's guide to withdrawing consent for an open banking app covers how that works.

On outcomes, there is some evidence that variable payments help people who are paid irregularly. In a Moneyline variable recurring payment trial for credit repayment, there was a 10% drop in arrears compared to those using standard Direct Debits¹⁸. The same research points to the problem that fixed-date collection creates: charging people if they do not have the exact amount of money in their account at the same time every month¹⁹. That is the gap variable recurring payments are designed to close, by letting a payment be timed to when money actually arrives.

That matters most for people on variable income. Energy suppliers already offer flexibility over the day of the month the bill is due, how frequently the bill is paid, and by what means the bill is paid²⁰. Variable recurring payments would extend that flexibility to the payment method itself, and could allow consumers to break up a large bill like energy into smaller and more manageable chunks, weekly instalments for example²¹.

Sweeping: the one use banks must already support

Sweeping is the automated movement of money from your current account to another account in your own name, including one held outside your bank²². It is the one use of variable recurring payments that banks have been required to support since 2022⁴. If you have ever used an app that tops up your savings from your current account, that is likely to be sweeping.

The rules around it are narrow. Sweeping variable recurring payments are typically restricted to other current or savings accounts²². You cannot use sweeping to pay a business, and you cannot use it to move money to someone else's account. It is a transfer between accounts you hold.

The other type is different. Variable recurring payments for goods and services are recurring payments to a business, and you will only be able to use them with participating companies²². That is the type that would compete with Direct Debits for bills, and it is the type that is not yet widely available.

Where variable recurring payments are not yet available

The honest answer is that for most household bills, variable recurring payments are not an option yet. They are being tested with low-risk sectors such as utility companies, financial services and government agencies first, before being rolled out more widely³. The Payment Systems Regulator has consulted on expanding them into new use cases⁴, but that work is not finished.

The bigger gap is protection. As things stand, there is no equivalent to the Direct Debit guarantee for variable recurring payments³. That is not a small point. The Direct Debit Guarantee means that if your bank, or an organisation you are paying, makes a mistake, your bank must refund the payment to you¹. Without an equivalent, a consumer who is overcharged through a variable recurring payment has to rely on the provider's own terms and the general complaints route rather than an automatic refund right.

There is also a warning from consumer research. Which? has warned shoppers to think carefully before using pay by bank due to weak consumer protections¹⁵. Pay by bank and variable recurring payments are not identical, but they share the open banking plumbing and the same underlying question about what happens when a payment goes wrong.

If you are weighing up a payment method now, the practical position is this. Direct Debits are covered by a guarantee, are accepted almost everywhere, and are used for around 7 out of 10 regular bill payments². Variable recurring payments offer more flexibility on timing and amount, and early trials suggest they can reduce arrears for people on irregular income¹⁸, but they are not yet available for most bills and they do not carry the same guarantee³.

Is a variable recurring payment the same as a standing order?

No, and the difference is worth knowing because people often use the terms interchangeably. With standing orders, the amount is the same every month, but Direct Debits can change⁵. A standing order is your instruction to your own bank, and it moves a fixed sum on a fixed date. A variable recurring payment is set up through open banking and the amount can change, so it behaves more like a Direct Debit.

That distinction matters when your bill changes. If you pay an energy bill by standing order and your usage goes up, the standing order does not adjust, and you build up a shortfall. If you pay by Direct Debit, the company can take a different amount each month depending on how much is due⁷. Variable recurring payments sit on the Direct Debit side of that line.

There is also a timing difference. If you pay by standing order, the cut off date for payments will vary month to month²³. Direct Debit collection dates are set by the company, and some organisations only collect on specific days: StepChange, for example, can only accept Direct Debit payments on the 1st or 10th of the month²⁴. That rigidity is exactly what variable recurring payments are designed to soften.

Can I pay my energy or phone bill by variable recurring payment?

Not yet for most people. Variable recurring payments are being tested with utility companies, financial services and government agencies first, before being rolled out more widely³. So the answer today is that you are unlikely to be offered one by an energy supplier or a phone company.

What you can do is change how your energy Direct Debit works. You might be able to make variable direct debit payments instead of paying the same each month²⁵. If you do that and you do not have a smart meter, you will need to send monthly meter readings to your energy supplier²⁵. Without readings, the payments will usually be based on an estimate of the amount of energy you will use over a year²⁵.

It is worth knowing what you would be giving up. Usually paying by direct debit allows you to be on your energy supplier's cheapest tariff, so your bill may increase a little if you cancel the direct debit²⁶. You can get money off your bills by using Direct Debit to pay most energy and telephone companies⁸, and energy companies and phone providers often give a discount if you pay by direct debit²⁷. You may also get a discount on your water bill for paying by Direct Debit²⁸.

Fixed energy tariffs do not change that. Your bills or direct debit payments are not fixed, and they depend on how much energy you use²⁹. The tariff fixes the rate per unit, not the total.

Do I need my sort code and account number to set up a variable recurring payment?

No. That is one of the practical differences. A Direct Debit is set up by a company using your sort code and account number³. A variable recurring payment is powered by open banking, so you connect an authorised payment provider to your bank account instead³.

In practice that means you authorise the connection through your bank's app or website rather than reading out your account details. Banks that offer variable recurring payments list them alongside their other payment types. first direct, for example, lists immediate payments, future-dated payments, standing orders and variable recurring payments, with the variable recurring payment option available only for domestic payments from its 1st Account³⁰.

If you want to see what is already set up on your account, most providers have a section called regular payments or similar, which lists your recurring payments and direct debits³¹. That is the quickest way to check what is running before you add anything new.

Will variable recurring payments replace Direct Debits?

The payment figures suggest not any time soon. Direct Debit use increased by 2% to 5 billion payments in 2025, and it is forecast to see moderate growth and reach 5.4 billion payments in 2035². That is a mature, growing method, not one in decline.

Variable recurring payments are still in a testing phase, limited to low-risk sectors³, and they lack the guarantee that makes Direct Debits trusted for bills³. Until that changes, the two are likely to sit alongside each other rather than one replacing the other.

For a consumer, the sensible approach is to know which method you are using for each payment. Direct Debits carry the guarantee and are accepted almost everywhere. Variable recurring payments may suit you better if your income is irregular and you want payments timed to when money arrives, but they are not yet available for most bills and they do not carry the same protection. If you are setting up payments and want to understand the wider picture, the site's guide to everyday money tasks covers switching, complaints and getting help when something goes wrong.