Open Banking has enabled monumental advances in financial wellness since it was introduced in 2018, and its most meaningful contribution to the health of consumer wallets is now just 6 months away.
The UK’s Competition and Markets Authority (CMA) has now mandated Sweeping, the automatic transfer of money between a customer’s own accounts, be made available to banking customers within half a year’s time via Variable Recurring Payments. VRPs allow customers to connect authorised payments providers (PISPs) to their bank account to make payments on their behalf within agreed parameters.
Laid out in this letter the news is not a surprise to those following this development with an overwhelming body of evidence on the commercial and consumer benefits of Sweeping presented by the industry.
The CMA’s ruling, which means the largest UK current account providers will have to implement VRPs, will bestow significant benefits on consumers, including more control over their money and protection from unwanted fees. Sweeping allows customer money to be transferred automatically between their accounts so that excess funds can be held in savings accounts or used to repay debt and to avoid going overdrawn.
Mandating the CMA9 banks to adopt VRPs is a major milestone for the industry: it paves the way for payment innovation and the creation of new financial services that put customers first. VRPs are a cheaper, more secure replacement for Direct Debits and card payments and likely would have seen limited adoption without the CMA’s support.
At Moneyhub, which was started back in 2014 to give consumers greater control over their finances, we have been early and passionate supporters of VRP and Sweeping. In fact when we first started lobbying for Open Banking legislation we saw the two payment tools as enablers of financial wellness for both businesses and individuals.
“The CMA’s ruling, which means the largest UK current account providers will have to implement VRPs, will bestow significant benefits on consumers, including more control over their money and protection from unwanted fees.”
Through our work in the FCA sandbox in 2020 we demonstrated the demand for Sweeping and found the only obstacle remaining to widespread adoption was fair and open access by all the organisations, such as banks covered by PSD2; a hurdle that has now been removed.
VRP and Sweeping are destined to be key pillars of the future payments architecture: they are better alternatives to legacy payment methods, most notably Direct Debits and card payments, by virtue of being cheaper, more secure, faster and enabling greater financial autonomy for customers. With this in mind we hope the banks take the opportunity to go further and cover other use cases for Variable Recurring Payments, automatically and safely paying for a child's school meal, truing up housemates bills or even limiting how much and when you can spend on amazon!
The future is approaching fast. The Moneyhub platform is ready. We focus on providing great customer experiences via White Label or API.
If you want to know more about VRPs and Sweeping and how we can optimise the journey please get in touch.