Open Banking payments in the UK jumped 39% in January 2024, study shows

By Puja Sharma

Value of Tax payments made to HMRC via Pay by Bank increases substantially by 38.9% in Jan 2024, compared to Jan 2023

• The volume of payments made to HMRC using Ecospend’s Pay by Bank technology has increased by over 140,000 compared to January 2023
• The total value of those transactions is £3.3 billion

Ecospend, a Trustly company, confirms that more than one million customers made payments through its Pay by Bank technology to make over £3.3 billion in tax payments to HMRC since the start of 2024 – in part thanks to the Self-Assessment tax deadline on the 31^st January.

Compared to January last year, the volume of these transactions has increased by 16%, while the value of transactions is 38.9% higher. This highlights the rapid adoption of Ecospend’s solution since the beginning of their work with HMRC, which marked the first time that an Open Banking payment method had been embedded within a government system.

Payments made via the Pay by Bank solution are sent directly from the tax payer’s bank account, using validated HMRC details, which increases the speed of transactions, has potential cost savings and reduces the risk of human error.

Open Banking is increasingly recognized as integral to the evolution of alternative credit scoring models. By advocating for the integration of Open Banking within these models, the report underscores its pivotal role in enhancing the accuracy and depth of credit assessments.

One of the primary benefits of incorporating Open Banking into alternative credit scoring is the access it provides to a wealth of bank account transaction data. This data, which was previously inaccessible to credit bureaus and other providers, offers valuable insights into an individual’s financial behavior and patterns. By analyzing this information alongside traditional credit data, such as payment history and credit utilization, a more comprehensive and nuanced understanding of the consumer can be achieved.

Moreover, Open Banking facilitates the creation of a holistic view of the consumer’s financial profile. By aggregating data from various financial institutions and sources, including transactional data from bank accounts, credit card transactions, and loan repayments, a more complete picture of the individual’s financial health and behavior emerges. This holistic perspective enables credit bureaus and lenders to assess creditworthiness with greater accuracy, taking into account factors beyond traditional credit metrics.

Furthermore, the integration of Open Banking into alternative credit scoring has significant implications for business credit assessment, particularly for small and medium-sized enterprises (SMEs). By leveraging Open Banking technology, lenders can access real-time financial data from SMEs, allowing for more dynamic and informed credit decisions. This improved visibility into the financial performance and cash flow of SMEs can mitigate the inherent risks associated with lending to this segment, ultimately facilitating greater access to finance for SMEs and fostering their growth and development.

The utilization of Open Banking within alternative credit scoring models represents a paradigm shift in credit assessment practices. By harnessing the wealth of data available through Open Banking, credit bureaus, lenders, and other providers can enhance their ability to accurately assess credit risk, create a more inclusive financial system, and drive economic empowerment for individuals and businesses alike.