CMA gives OBIE green light to mandate VRPs for sweeping

Ellie Duncan
28 Jul 2021

In a letter to the Open Banking Implementation Entity (OBIE), the Competition and Markets Authority (CMA) said it has decided that implementing ‘sweeping’ through variable recurring payments (VRPs) is “appropriate and proportionate”.

The CMA’s decision means that the largest UK current account providers will have to implement VRPs within the next six months and allow free access to third-party providers who are using VRPs to enable their customers to move money from their current accounts to other accounts, the OBIE confirmed.

In the letter to the OBIE Implementation Trustee Imran Gulamhuseinwala (pictured) published yesterday (27 July), the CMA wrote: “Making effective provision for sweeping is an important element of the Open Banking remedy and it is important that sweeping provisions include the ability to move funds out of current accounts into accounts earning a higher rate of interest,and conversely enables customers to access alternative and cheaper sources of short-term credit.”

The CMA has left it for Gulamhuseinwala to determine a deadline in January 2022 for the CMA9, which includes Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, NatWest Group and Santander, to implement the requirements.

Gulamhuseinwala said that the ruling on sweeping and VRPs, the “last major piece of functionality” to be delivered under the CMA’s Open Banking remedies, is a “win” for competition and innovation, and will deliver significant benefits to consumers and small businesses.

“We’ve been anticipating a decision from the CMA on this for some time now and have been on standby to implement this by the end of this year,” he said.

“The OBIE will now mandate variable recurring payments for the purpose of sweeping, which is the automatic movement of money between an account holder’s different accounts. We like to think of it as the smarter version of direct debit payments.”

Gulamhuseinwala added: “This is a major step forward in payments, giving consumers more control over their money whilst also protecting them from incurring unwanted fees.

“It will, for example, allow surplus money to be automatically transferred from a current account to a savings account to help build a savings pot, or to an overdraft or loan account to help the customer keep their borrowing costs to a minimum.”

Matt Parish, senior product manager at Open Banking platform TrueLayer, said that it is a “strong proponent of sweeping and VRPs”.

“It has the potential to drive further innovation from fintech firms to build and develop new services that use VRPs to help consumers and businesses manage their finances,” Parish added.

“VRP APIs will provide a platform to offer more secure and efficient alternatives to direct debit and continuous payment authority (card on file). They offer an obvious solution for subscriptions, bill payments and recurring payments.”

The OBIE’s Imran Gulamhuseinwala was a guest on Open Banking Expo Unplugged – hear what he had to say about the final implementation stages of the roadmap for Open Banking in the UK and what a successor organisation might look like.

Open Banking payments platform Token and Open Banking Expo are inviting bank TPPs, ASPSPs, merchants and payment providers to give their opinions on the value of, demand and readiness for VRPs and sweeping. Click here to take part in the survey.