The UK Competition and Markets Authority (CMA) has decided to postpone the introduction of variable recurring payments (VRPs) by six months, recognising that the largest banks are not ready to implement the service by January.
In a letter sent to the Open Banking Implementation Entity (OBIE), the CMA accepted the OBIE’s recommendation to delay the implementation of VRPs until July 2022 after finding that the nine largest banks, known as the CMA9, could not meet the January deadline.
Sweeping is the automated movement of funds between customer accounts. The service allows consumers to automatically move funds between their own accounts. For example, a consumer could automatically set movement across various bank, savings and loans accounts to ensure maximum value, such as earning best rates of interest on deposits or reducing borrowing costs.
“Sweeping services were identified in the Final Report of the Retail Banking Market Investigation as one of the use cases for open banking. Implementation of this standard will therefore mark a significant milestone for open banking,” Daniel Gordon, the CMA's senior director, markets, wrote in the letter.
In July, the competition agency mandated the use of VRPs as the mechanism to implement sweeping by January 2022.
However, earlier in November, OBIE trustee Charlotte Crosswell wrote a letter to the CMA, stating that “most if not all the CMA9 do not have a realistic prospect of meeting the target of implementing VRPs for sweeping by January 31, 2022”.
The delay in preparations has not come as a surprise in some quarters, with some pointing out that banks have been opposing the proposal to begin with and have been dragging their feet to implement the service.
CMA’s Gordon wrote in his response that “it is clearly disappointing” that the deadline will not be met, and it is “vitally important to ensure that work to progress the standard’s implementation continues as a priority, and at pace, across the CMA9”.
At the same time, he said the CMA agrees that “in order for the standard to be considered implemented, it needs to be available for general use by [third-party providers]”.
The new timeframe requires the mandated banks to share a detailed delivery plan for full capability with the CMA by January and start the testing and validation of third-party providers in the first quarter of 2022.
By July, banks must have completed the testing of the VRP standard in a live, controlled environment so the firms are ready to progress to general availability of the standard.
Despite some bank opposition, last week, speaking at Open Banking Expo UK in London, NatWest’s Stephen Wright said the ecosystem is now “mature enough” for VRPs and sweeping.
“So I think the timing is right. We do see this as both a mandatory obligation but also as a commercial opportunity.”
NatWest is one of the CMA9, along with Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide and Santander. In a submission sent to the Payment Systems Regulator’s call for views on consumer protection in interbank payments, the bank warned of “significant consumer protection risks” involved in VRPs.