Home Fraud, Error and Debt HMRC ‘Confirmation of Payee’ tender seeks to capitalise on open banking

HMRC ‘Confirmation of Payee’ tender seeks to capitalise on open banking

Confirmation of Payee: helps to avoid errors such as mistyping account details accidentally | Credit: rostichep; Pixabay

The UK’s tax, payments and customs authority has issued a tender for ‘Confirmation of Payee’ services in the latest signal that the government is engaging with – and seeking to capitalise on – open banking.

HM Revenue & Customs (HMRC)’s tender, which has an estimated total value of £9m (about $12.5m), ultimately aims to make it easier for citizens and businesses to make and receive government payments, as well as to detect and prevent fraud.

HMRC is the first government authority and non-bank to use Confirmation of Payee (CoP), a name-checking service that uses open application programming interfaces (APIs) to automatically check names against account information held by payment service providers in real-time.

CoP – which helps to avoid errors such as mistyping account details accidentally, providing operating efficiencies in the number of payments that need to be investigated or recalled – is being rolled out in stages in the UK, with rules and standards being set by retail payments authority Pay.UK.

HMRC’s tender, which was published on 26 February, states that HMRC ‘has identified a requirement for the provision of confirmation of payment services in order to enable our customers to easily make bank transactions to and from the authority’. The supplier will need to be certified by the Open Banking Implementation Entity (OBIE) – the UK organisation that sets the software standards and governance structures enabling the implementation of open banking, which involves the use of open APIs to enable bank account holders to share their financial data with third parties.

‘Improving the validation process’

HMRC undertakes about 40 million name-checks per year across payments ranging from welfare payments (‘Universal Credit’) to Covid-19-related temporary programmes such as the Self-Employment Income Support Scheme.

‘Individuals and organisations can transact with the authority [HMRC] via a growing number of online internal and external services, many of which require the user to supply bank account details. These online services currently use industry-standard checks, sort-code data and third-party APIs to validate bank account details,’ states the procurement’s accompanying technical notice. It says the addition of CoP ‘shall allow [HMRC] to improve this validation process, which consequently will make these online services easier to use and provides additional means for preventing and detecting fraud.’

The HMRC tender notice says that bidders need to have a relationship with a company (‘sponsor’) that has open banking credentials (or be able to demonstrate that they will have by the time their work would start).

More than 300 firms have completed the enrolment process into what OBIE refers to as its ‘Production Directory’, with another 450 in the pipeline, according to OBIE’s recently published annual report. At the ‘user’ end, more than three million UK citizens and businesses are now using open banking-enabled products, according to OBIE’s latest data.

Towards ‘government as a platform’

HMRC’s procurement information goes on to say that ‘central government strategy is moving towards “government as a platform” [and so] the authority [HMRC] needs to ensure that it is not limited in how it makes its services available to other government bodies, local government and the wider public sectors’.

The contract will be enabled for all public sector organisations to use, including central departments and their arm’s length bodies, education and higher-education sector, housing associations, local authorities and charities.

The maximum contract value is set at £9m over the contract period of two years plus a possible one year extension. The deadline for expressions of interest is 29 March, with the contract proposed to start on 24 June. The contracting authority is HMRC’s office in Salford, Greater Manchester.

OBIE’s head of ecosystem engagement Simon Lyons wrote on LinkedIn that the tender ‘shows that [the UK] government and HM Revenue & Customs are leading the way in embracing open banking’.

The tender’s issuance comes just weeks after HMRC’s award of the first UK government open banking contract – worth up to £3m ($4.1m) – to Ecospend, a London-based fintech company. This contract was inked following a tender process for ‘Payment Initiation and Account Information Services’, revealed by Global Government Fintech that kicked off last summer. Ecospend will provide account-to-account payment software that will allow HMRC to process payments.


Click here for Global Government Fintech’s dedicated topic section

Click here for Global Government Fintech’s interview with OBIE trustee Imran Gulamhuseinwala

Click here for Global Government Fintech’s review of global governments’ explorations of open banking’s potential for delivering citizen services

Click here for Global Government Fintech’s analysis of the UK government’s explorations of open banking’s potential to ‘streamline’ tax payments for small businesses