Last updated: July 2024

Dynamic Recurring Payments are changing how subscription and repeat billing works across Europe. Here's what DRPs are, how open banking enables them, and what UK merchants on Shopify and WooCommerce need to know about where recurring billing is heading.

Recurring billing has a structural problem — and open banking is solving it

Card-on-file recurring payments are the standard model for subscription billing. They're also one of the most friction-heavy, failure-prone, and operationally complex parts of running a subscription business. Stored card credentials expire. Customers cancel cards after fraud and forget to update their details. Issuers decline recurring charges that trip their fraud rules. And none of it is visible to the merchant until the payment fails and the customer is already one step toward churning.

Dynamic Recurring Payments — DRPs — represent a different approach. Built on open banking infrastructure rather than card networks, they allow customers to authorise a merchant to initiate payments directly from their bank account, with parameters defined at the point of authorisation rather than relying on stored credentials that may have become stale.

Across Europe, DRPs are emerging as a serious alternative to card-based recurring billing — not as a replacement for everything, but as a structurally sounder model for the specific challenges subscription businesses face. This guide covers what DRPs are, how they work, what the European regulatory landscape looks like, and what this means for UK merchants building or managing recurring revenue models.

Quick summary

• Dynamic Recurring Payments allow authorised merchants to initiate payments directly from a customer's bank account, without card credentials, using open banking infrastructure

• They address the core failure modes of card-on-file recurring billing — credential expiry, issuer declines, and data drift — because they're linked to the account itself rather than to a card issued against it

• The European regulatory environment is actively supporting DRP development, including through the SEPA Payment Account Access (SPAA) Scheme and broader open banking mandates

• The payments landscape is consolidating around faster, cheaper, account-to-account payment rails as an alternative to card network infrastructure — recurring billing is one of the clearest use cases driving this shift

• For UK merchants, DRPs via open banking are an emerging but increasingly practical option, particularly for subscription models where card decline rates and involuntary churn are material problems

• Pay by Bank via Fena provides the open banking payment infrastructure through which UK Shopify and WooCommerce merchants can access account-linked payment capabilities

What Dynamic Recurring Payments are

A Dynamic Recurring Payment is a payment initiated by a merchant — rather than by the customer at the moment of transaction — that draws directly from a customer's bank account under a pre-authorised mandate. The "dynamic" element distinguishes DRPs from fixed recurring payment mandates: the payment amount, timing, or both can vary within parameters the customer has agreed to, rather than being locked to a fixed amount on a fixed schedule.

This makes DRPs well-suited to billing models where the amount varies — usage-based billing, tiered subscription plans, metered services — as well as standard fixed subscriptions where the mandate flexibility provides a more resilient payment relationship.

The critical structural difference from card-on-file recurring billing is that the mandate is linked to the customer's bank account, not to a card issued against it. When a customer replaces an expired card, their DRP mandate is unaffected. When a card is cancelled following fraud, the recurring payment relationship continues. The mandate survives the events that cause card-on-file recurring billing to fail — which is the primary commercial advantage of the model.

The problem DRPs solve: why card-on-file recurring billing fails

Card-on-file recurring billing — the mechanism behind most subscription payment models today — relies on stored card credentials remaining valid and accepted over time. In practice, this assumption breaks down regularly and at scale.

Card expiry.

Cards have built-in expiry dates, typically two to four years from issue. Every customer on a multi-year subscription will have their card expire during the subscription lifecycle. Without an automated card updater service, each expiry becomes a failed payment. With one, coverage is partial and the overhead is ongoing.

Card replacement.

Customers replace cards after fraud, loss, or bank switching at rates that compound across a subscription base. Each replacement that isn't updated in the merchant's system is a potential failed recurring charge. The customer may not even realise the update is needed until they receive a failed payment notification — if they receive one at all.

Issuer declines.

Recurring card charges are subject to issuer fraud detection, velocity limits, and category restrictions that apply independently of whether the customer has sufficient funds and genuinely wants to continue their subscription. A charge that was accepted last month can be declined this month because an issuer rule changed or a spending pattern triggered a flag.

Silent churn.

Failed recurring payments don't always generate immediate customer action. Depending on how the merchant handles billing failure notification, customers can lapse silently — the subscription stops, the customer notices eventually, and by then re-engagement is harder than retention would have been.

The aggregate effect across a subscription business is involuntary churn: customers who didn't choose to cancel but whose subscriptions ended because a payment mechanism failed. DRPs address this by removing the card credential layer that fails — the mandate is linked to the account, and accounts don't expire the way cards do.

Consumer experience: what DRPs look like from the customer's perspective

The customer experience of a DRP mandate setup is similar to authorising any open banking payment. The customer authenticates within their banking environment, reviews the mandate terms — who can initiate payments, for what amount range, on what schedule — and gives explicit consent. The authorisation is transparent: the customer knows exactly what they've agreed to.

Subsequent payments are initiated by the merchant within the authorised parameters, without requiring the customer to re-authenticate each time. This is the convenience parallel to card-on-file: the customer sets up once and the recurring relationship is maintained without repeated friction. But unlike card-on-file, the mandate is linked to the account and visible in the customer's banking interface — they can see it, manage it, and revoke it from within their own bank if they choose to cancel.

This transparency is a double-edged advantage. It gives customers more visibility and control over their recurring payment relationships, which tends to increase trust. It also means the merchant's billing relationship is visible to the customer in a way that card-on-file charges sometimes aren't — which is a reason to ensure the billing communication and customer experience around recurring payments is clear and well-managed.

The regulatory landscape: how Europe is enabling DRPs

The development of Dynamic Recurring Payments in Europe is being driven by both market forces and regulatory architecture. Understanding the regulatory context matters because it shapes what's technically possible and on what timeline.

SEPA Payment Account Access (SPAA) Scheme.

The European Payments Council's SPAA Scheme is designed to create a standardised framework for premium open banking services, including Dynamic Recurring Payments. By establishing common rules and technical standards for account access and payment initiation across the SEPA area, SPAA aims to enable a consistent DRP capability across European markets rather than a patchwork of national implementations.

PSD2 and its successor.

The Second Payment Services Directive established the open banking mandate across the EU and, through the FCA's implementation, in the UK. Its planned successor — PSD3, along with the Payment Services Regulation — is expected to strengthen and standardise open banking payment capabilities further, including recurring payment mandates. The regulatory direction of travel is clearly toward more capable, more standardised open banking payment infrastructure.

UK open banking framework.

The UK's own open banking framework, implemented by the FCA and the Open Banking Implementation Entity (OBIE), has established the foundational infrastructure for account-level payment initiation. Variable recurring payments (VRPs) — the UK's functional equivalent of DRPs — are being rolled out incrementally, starting with sweeping use cases and moving toward broader commercial applications.

The combination of European regulatory intent and UK domestic implementation means DRP capability is being built into the regulated financial infrastructure — not as a niche product feature but as a mandated component of the payment system.

Market dynamics: why the payments landscape is shifting toward account-to-account models

The broader context for DRPs is a payment landscape in transition. International card schemes — Visa and Mastercard — have dominated online payment processing for decades, with their infrastructure, fee structures, and dispute mechanisms shaping how merchants and consumers interact with payments. That dominance is being competed for more aggressively than at any point in the internet economy's history.

PayTech and direct merchant-consumer connections.

The growth of payment technology companies building directly on open banking rails is creating payment propositions that connect merchants and consumers without card network intermediaries. These propositions offer lower costs, faster settlement, and payment experiences designed around specific use cases — including subscription and recurring billing — rather than adapted from card payment infrastructure.

Real-time payment rails.

Faster Payments in the UK, SEPA Instant Credit Transfer across Europe, and equivalent schemes in other markets are providing the infrastructure for near-real-time account-to-account settlement. This makes DRPs practical — a recurring payment initiated by the merchant can settle in the customer's account the same day rather than going through multi-day clearing cycles.

Consumer familiarity with bank-authenticated payment.

As open banking adoption grows — over 11 million UK consumers use open banking services monthly — the friction associated with bank-authenticated payment setup decreases. Customers who are already comfortable authenticating through their banking app are more likely to accept a DRP mandate setup with low friction, which improves the commercial viability of the model for merchants.

Security and sovereignty.

European regulators and payment industry participants have expressed consistent concern about the strategic dependency on non-European card networks for the majority of European payment volume. DRPs and open banking payment infrastructure represent a partial remedy — European-regulated, domestically controlled payment rails that reduce reliance on international card scheme infrastructure.

What this means practically for UK subscription merchants

For UK merchants running subscription businesses today, the immediate practical question is what to do now versus what to plan for.

Now:

Card-on-file recurring billing remains the dominant model and the right choice for most existing subscription infrastructure. The priority is managing its failure modes — account updater services, smart retry logic, proactive customer communication around failed payments — while monitoring the development of open banking recurring payment capabilities.

Near term:

Variable Recurring Payments (VRPs) for commercial use cases are being rolled out in the UK and will provide an open banking recurring billing option that addresses the card credential expiry and decline problems described above. Merchants with high involuntary churn driven by card failures should be evaluating when and how to add this as a complementary or primary recurring billing mechanism.

Strategically:

The trajectory of both regulation and market development points toward account-to-account payment infrastructure becoming increasingly capable and adopted. Merchants who build payment infrastructure on open banking rails — starting with Pay by Bank for one-off transactions via Fena and extending to recurring payment mandates as the capability matures — are positioning for a payment landscape where card dependency is a cost rather than a necessity.

Fena's Pay by Bank integration provides the starting point for UK Shopify and WooCommerce merchants. One-off Pay by Bank transactions capture the cost, chargeback, and settlement timing benefits immediately. As DRP and VRP capabilities develop and become available through Fena, the same infrastructure extends naturally into recurring billing use cases.

Frequently asked questions

What are Dynamic Recurring Payments?

Dynamic Recurring Payments are bank-account-linked payment mandates that allow authorised merchants to initiate payments directly from a customer's account, within parameters the customer has agreed to at setup. Unlike card-on-file recurring billing, the mandate is linked to the account itself rather than to a card, which means it isn't affected by card expiry, replacement, or issuer declines.

How are Dynamic Recurring Payments different from direct debit?

Both DRPs and direct debit allow merchants to pull payments from customer accounts. The differences are in speed, flexibility, and infrastructure. Direct debit operates on slower clearing rails with fixed processing windows. DRPs operate on real-time payment rails with same-day or faster settlement. DRPs also typically offer more flexibility on payment amount and timing within agreed parameters, and are initiated through open banking infrastructure rather than the legacy direct debit scheme.

Are Dynamic Recurring Payments available in the UK?

Variable Recurring Payments (VRPs) — the UK implementation of the DRP model — are being rolled out under the UK open banking framework. Commercial VRPs (for use cases beyond account sweeping) are in development and becoming increasingly available. The timeline and coverage depend on which banks are participating and which payment providers have integrated the capability.

What is the SEPA Payment Account Access Scheme?

The SPAA Scheme is a European Payments Council initiative that establishes standardised rules and technical specifications for premium open banking services across the SEPA area, including Dynamic Recurring Payments. It aims to create consistent, interoperable DRP capabilities across European markets, providing a common foundation for merchants, banks, and payment providers to build recurring payment products.

Why do subscription merchants have high card decline rates?

Subscription businesses store card credentials at sign-up and use them to initiate recurring charges over time. Cards expire, get replaced following fraud or loss, and may be subject to issuer rules that change independently of the customer's intent to remain subscribed. Each of these creates a failed payment that the card-on-file model can't prevent without ongoing credential maintenance. DRPs address this by linking the payment mandate to the account rather than to a card.

How does Pay by Bank via Fena relate to Dynamic Recurring Payments?

Pay by Bank via Fena currently delivers one-off open banking payments for UK Shopify and WooCommerce merchants — capturing the cost, fraud, and settlement timing benefits of A2A payment infrastructure for individual transactions. As Variable Recurring Payment capabilities develop and become available through Fena's open banking infrastructure, this extends naturally into the recurring billing use case. Merchants adopting Pay by Bank now are building on the same infrastructure that DRP capabilities will run on.