UK government open banking tender puts focus on payments

By on 03/09/2020 | Updated on 24/09/2020
HMRC is running a £3m (US$3.92m) tender for ‘Payment Initiation and Account Information Services’. (Photo courtesy Negative Space via Pexels).

The UK’s journey towards implementing open banking to deliver citizen services has taken a significant step forward with the opening of what is believed to be the country’s first government tender specifically for open banking.

In a move that will be greeted by open banking’s advocates as a breakthrough statement of intent, HM Revenue & Customs (HMRC) is running a £3m (US$3.92m) tender for ‘Payment Initiation and Account Information Services’.

HMRC has been working alongside the Open Banking Implementation Entity (OBIE) – a company set up by non-ministerial government department the Competition and Markets Authority (CMA), and  funded by the UK’s nine largest banks and building societies – on devising the procurement exercise.

The technology behind open banking, application programming interfaces (APIs), enables bank account holders to share information with third parties.

HMRC’s tender focuses on ‘Payment Initiation Services’ (PIS), which – its proponents believe – should mean a simpler and more secure payment process for citizens who wish to pay HMRC via bank transfer.

The aim is that citizens making payments will not need to manually input as many details as would have been required through traditional methods. For example, there would be no need to enter details such as a reference number, payment amount and card number when paying a bill. Instead, customers would need to check and authorise a ‘pre-populated’ payment. Any increased use of bank transfer over card payments should mean cost savings for government.

Aiming to reduce payment costs

“Currently, our bank transfer journey is non-automated which can result in a high volume of customer errors that are resource-intensive to rectify,” according to technical details that relate to the HMRC tender notice. “By providing an innovative, well-designed journey that can be populated with our numerous reference formats and HMRC bank accounts, with little effort from our customers, we believe we can encourage card-payers to move to this more cost-effective method and subsequently reduce our payment associated costs significantly.”

The technical note also demands that the appointed service provider needs to be able to cope with HMRC workflow peaks “throughout the year” and “increased volumes during the contract period”.

The tender also includes ‘Account Information Services’ (AIS), which enable third parties to access customers’ transactional data to deliver tailored financial services. Use cases for AIS in HMRC are understood to be in the development stage but HMRC included AIS in the tender to avoid the cost of a further procurement.

The HMRC contract would start in February 2021 and run initially for two years.

Cross-government exploration

Open banking, which aims to boost competition and promote transparency and innovation in financial services, is being explored – albeit cautiously – by a growing number of governments worldwide. Though examples of it being used by governments remain limited, it is seen to have significant potential in public service delivery.

HMRC started to explore opportunities associated with open banking in 2019 and agreed internally to source a third party to provide PIS in February this year.

Nick Down, head of payments at HMRC, said last month that it was “still early days” for open banking but that as customers’ interest – and confidence – grows, “it will be easier to implement the practical uses of open banking” and that “in time, we can see open banking solutions becoming the norm”.

Wider UK government strategy around open banking is being taken forward by the Government Banking Service, which is supporting HMRC’s current procurement process.

Potential benefits ‘considerable’

“We are delighted to see HRMC issue this tender,” OBIE’s head of ecosystem engagement, Simon Lyons, told Global Government Fintech – the recently-launched sister publication of Global Government Forum. “This is a clear example of government recognising the many benefits that open banking affords in terms of how a better customer experience – coupled with increased efficiency – can be delivered in public services.”

“The potential benefits are considerable. For the end user, paying by bank transfer offers a simple, secure and instant payment mechanism. For government, this type of digital payment replaces outdated payment and collection methods that are prone to error. For example, if a payment is submitted with the wrong invoice reference or tax reference, open banking technology works seamlessly in the background, utilising customer data to fix any errors. This will also help to significantly reduce fraud as HMRC will be able to ensure they are sending payments to the correct person.”

In May OBIE’s trustee, Imran Gulamhuseinwala, described “building out more payments functionality” in open banking as a priority while predicting that payments would be its biggest near-term growth area.

Reacting to the HMRC tender, Rob Haslingden, head of digital propositions at credit reference company Experian, wrote on LinkedIn: “Great to see government picking up the baton on open banking and looking to deliver efficiency and better customer experience in public services.”

About Ian Hall

Ian is editor of Global Government Fintech a sister publication to Global Government Forum. Ian also writes for media including City AM and #DisruptionBanking. He is former UK director for the pan-European media network Euractiv (2011-2018), editor of Public Affairs News (2007-2011) and news editor of PR Week (2000-2007). He was shortlisted for ‘Editor of the Year’ at the British Society of Magazine Editors (BSME) Awards in 2010. He began his career in Bulgaria at English-language weekly the Sofia Echo. Ian has an MA in Urban and Regional Change in Europe and a BA in Economics, both from Durham University.

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