The CMA defines sweeping rules for variable recurring payments
By Puja Sharma
In July 2021, the CMA mandated the use of variable recurring payments (VRPs) as the mechanism for implementing sweeping under item A10 of the Roadmap (the July letter).
At the December Implementation Entity Steering Group (IESG) meeting, the CMA committed to providing its views to the OBIE on these issues to help resolve any ambiguity. VRPs for sweeping is an important mechanism that allows for the development of innovative products and services to help further open up competition in the retail
In 2020, The UK’s OBIE (Open Banking Implementation Entity) launched consultations on Variable Recurring Payments and Sweeping, a move it described as representing the next stage in the development of open banking in the UK, as per the IBS Intelligence report.
Variable Recurring Payments (VRPs) allow customers to safely connect authorised payment providers to their bank account so that they can make payments on the customer’s behalf, within agreed parameters that offer more control and transparency than existing alternatives. Sweeping is the automated movement of funds for a customer between two accounts in their name, usually to help the customer avoid charges or benefit from better interest rates.
During the OBIE’s consultation on the standard version, concerns were raised by some stakeholders that there was some ambiguity in the above definition of sweeping, with differing stakeholder views as to whether certain use cases fell within or outside the scope of the definition.
Senior director at the CMA, Danial Gordon in the letter to the OBIE clarified the definition of Variable Recurring Payments for Sweeping “In reviewing the submissions provided to the OBIE earlier this year, we were encouraged by the range of ambitious use cases envisaged for VRPs by the industry and are confident that VRPs for sweeping will be an important step towards the realisation of many of these broader use cases – either through commercial arrangements or future regulatory intervention.”
According to the Final Report, sweeping will facilitate the following features of the Open Banking remedy—Increasing competition for overdraft customers and increasing the choice of credit products available through unbundling credit from the current account. Help customers to make their balance work harder and encourage savings by increasing the interest they earn.
Siamac Rezaiezadeh, Director of Product Marketing at GoCardless, said, “The CMA deadline has arrived, marking the dawn of an exciting new era in open banking. While those of us in the FinTech world are keenly aware of the opportunities opened up by this milestone, the rest of the world has cause for celebration as well. After all, VRPs will be a
Game-changer for businesses and consumers alike, If you’re a business, think supercharged savings. Stronger security. Unrivaled reliability. If you’re a consumer, think of instant payments. Automated transfers. Peace of mind.
“However, as with most innovative ventures, the introduction of VRPs will take time. As banks begin their rollout, we’ve also been developing a unique bank payment network that gives businesses access to a range of account-to-account payment methods, from direct debit to VRPs, on a single platform. One company already tapping into our offering is Pillar, the new fintech breaking down credit borders across the globe. By using GoCardless, Pillar can grant its customers greater control over their payments through VRPs while still providing payment options for all consumers as the industry rollout continues.”
In the July letter, the CMA also agreed that the OBIE’s proposed definition of sweeping was appropriate:
- The source account needs to be a personal current account (PCA) or business current account (BCA).
- The destination account is any account into which a domestic payment can be made by the payer’s bank’s direct channel.
- Both accounts are UK sterling accounts.
- The payments can be unattended, not requiring any interaction by or presence of the payment service user at the time of making the payment.
- The transaction is between two accounts belonging to the same person or legal entity.
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