Home Open Banking & Finance UK public sector open banking aspirant supplier tally edges upwards

UK public sector open banking aspirant supplier tally edges upwards

UK government open banking ‘dynamic purchasing system’: Global Government Fintech screenshot of the ‘supplier registration’ and ‘appointed suppliers’ webpages (20 February 2024)

The number of suppliers on a nascent ‘dynamic purchasing system’ designed to facilitate the use of open banking across the UK public sector has started to edge upwards, reaching a tally of five companies – including NatWest, one of the country’s biggest banks – six weeks after its launch.

The ‘Open Banking Dynamic Purchasing System (DPS)’ has been set up by the Crown Commercial Service (CCS) – an executive agency of the Cabinet Office – with the ultimate aim of ‘reducing the costs of receiving money into public sector organisations, as well as reducing fraud’.

Frameworks (or agreements) overseen by CCS help public- and third-sector buyers to procure goods and services from a list of pre-approved suppliers, with agreed terms and conditions and legal protections. Creation of the open banking DPS – referred to by CCS as ‘RM6301’ (‘RM’ is used in all CCS agreement reference numbers) – followed the publication last year of an ‘Open Banking Dynamic Purchasing System (Data, Digital Payments and Confirmation of Payee Services)’ prior information notice, which stated a total value of £800m (about $1bn) over eight years.

Global Government Fintech reported on 12 December 2023 that companies aspiring to supply open banking-related services to the UK public sector were now able to contact CCS to join the DPS, which would open for use by public sector buyers on 8 January 2024.

Companies have begun to appear (one by one) on the UK open banking ‘appointed suppliers’ webpage since that date. At time of writing (20 February 2024) the companies present, as well as NatWest, are Ecospend, Moneyhub, OneID and the Smart Request Company (Ordo).

RELATED ARTICLE UK public sector open banking ‘dynamic purchasing system’ opens for business – our news story (12 December 2023) on the CCS launching RM6301

DPS: ‘open to emerging technologies’

Dynamic purchasing systems are one of four types of agreements available through CCS. A DPS allows suppliers to join at any time, ‘increasing competition and choice and meaning that it is open to new businesses, innovations and emerging technologies throughout the life of the DPS’ – a potentially helpful facet given the pace with which open banking-related technology has developed and new suppliers have emerged.

Companies looking to supply their services via the DPS need to pass CCS checks on areas including their ‘financial health’, cyber-security procedures and compliance with modern slavery rules. A ‘selection questionnaire’ testing potential suppliers’ suitability and capability to provide services to the public sector also needs to be completed. Public sector organisations are not obliged to use the DPS if they want to procure open banking services.

Explaining the decision to create the open banking DPS, the CCS stated in its announcement that the DPS had ‘gone live’ (on 12 December 2023) that ‘these services, which allow for read-only financial data to be shared between banks and third-party service providers, are designed to provide access to quicker, cheaper and more accurate banking services versus conventional payment acceptance methods, such as debit cards.’

‘By negating fees incurred by traditional debit-card payments, it is believed the DPS could help achieve savings of 70-80 per cent,’ the CCS stated. ‘The services offered under the agreement could also help reduce the volume of fraudulent or in-error payments made throughout the public sector by confirming or denying the identity of account holders. This will unlock the ability of open banking to clamp down on fraudulent activity, including false tax and benefit claims.’

Further ‘innovations and benefits’ mentioned in the CCS’s announcement of the DPS include: ‘allowing for more accurate understanding of personal financial circumstances, enabling more precise assessment of means’; ‘enabling vulnerable members of society to receive vital payments quicker’; and making it ‘easier for small- and medium-sized enterprises (SMEs), which make up a large number of the UK’s existing open banking providers, to become suppliers.’

CCS chief executive Simon Tse (who is due to retire from the organisation this year) said at the time that the organisation was ‘delighted to be launching the first comprehensive open banking agreement in the public sector, offering significant savings and vital innovations in financial capability’; that the solution (the DPS) was ‘built on extensive market engagement with a range of providers, from major banks to fintech start-ups and government institutions’; and that the ‘flexible agreement reaffirms our commitment to providing maximum value to our customers, and opens up opportunities for a diverse spectrum of suppliers in an exciting emerging market.’

RELATED ARTICLE UK government backs open banking with £100m-a-year eight-year supplier plan – our article (14 June 2023) on the CCS’s plans to create the DPS

‘Spark’ DPS: 335 suppliers

CCS had been exploring the possibility of creating the open banking DPS for more than 18 months, with the RM6301 webpage noting that ‘pre-market engagement’ began in May 2022. The webpage states that ‘several central government departments have attended a significant number of market engagement sessions’ – a reflection of interest in open banking’s potential for the public sector having spread beyond HMRC. It also notes that ‘colleagues from these departments have made up the members of [an] open banking working group’. The working group includes representatives from HMRC, Government Banking Services (GBS) and Government Digital Services (GDS).

The prior information notice stated that CCS ‘intend[ed] to launch for supplier onboarding’ from late-July with the DPS ‘anticipated to go live for use in the autumn’. Contract start and end dates, respectively, were specified as 31 August 2023 and 31 August 2031. CCS told Global Government Fintech in October 2023 that the date of the DPS’s release had been pushed back from the ‘indicative’ timings because of ‘additional necessary work to ensure the platform delivers the established requirements’.

The prior information notice, which was published on 8 June, noted that suppliers must have necessary Financial Conduct Authority (FCA) authorisations to provide open banking services.

The open banking DPS has some way to go to catch up with other DPS in terms of the number of companies on it. For example, at time of writing, a DPS known as ‘Spark’ has 335 suppliers; a DPS on AI services has 243 appointed suppliers; and a ‘Digital Inclusion and Support’ DPS has 44 appointed suppliers.

The Spark DPS is available to UK central government departments, agencies and public bodies, as well as wider public sector organisations and charities, to procure a ‘range of emerging technologies predicted to have the largest impact over the next two to five years – it specifically covers Internet of Things (IoT), artificial intelligence (AI) and automation, simulated and enhanced environments, engineering/materials science, data, wearables, transport and security.

RELATED ARTICLE HMRC completes open banking rollout and sets out new priorities – a news story (15 February 2023) on HMRC’s pioneering use of open banking (includes the department’s head of payments, Nick Down, describing “increasing interest” across UK government in using open banking)

HMRC in the vanguard

The UK is widely seen as global leader when it comes to developing an open banking ecosystem in the private-sector, spurred by the creation of its Open Banking Implementation Entity (OBIE) in 2016.

It has also blazed a trail in terms of public sector use of open banking. First mover in terms of public sector use was HM Revenue & Customs (HMRC), which procured a fintech solution to enable the department to receive payments via open banking in March 2021 – a government use case for open banking that has apparently made the UK department a global pioneer.

HMRC’s head of open banking payments, Rachel McLaren, speaking at the Global Government Fintech Lab 2023 event in Ireland (on 18 May) said that HMRC had (up to that point) received more than 5.5 million tax payments – worth a total of about £13.5 billion (almost $17bn) – through open banking since the department introduced the option to do so. (Global Government Fintech reported figures of 4.5 million tax payments worth about £12 billion in February 2023).

Global Government Fintech reported in February 2023 that HMRC had completed its rollout of open banking across all tax payment types capable of supporting it. The department’s head of payments, Nick Down, spoke at the time of ‘increasing interest’ across UK government in using open banking.

NS&I (National Savings & Investments), a UK state-owned savings bank, has followed HMRC’s lead in engaging a fintech company to enable the use of open banking technology to enable people to make payments. NS&I, which is a non-ministerial department, is using the same fintech company – Ecospend, whose acquisition by Sweden-headquartered Trustly completed in January 2023 – that HMRC has been using for the same purpose. HMRC’s contract with Ecospend was awarded on a ‘two years with one-year extension’ basis and is due to end on 29 February 2024, according to the contract award notice.

FURTHER READING One small website button, one giant leap for payments to government? – an article (6 April 2021) on HMRC’s launch of its open banking-enabled ‘pay by bank account’ option for people filing online self-assessment tax returns (i.e. ‘going live with open banking’)

Taking the PISPs (and AISPs)

RM6301’s webpage explains that public sector organisations will be able to use the DPS to access open banking services including: Payment Initiation Service Providers (PISPs), which ‘let you pay companies directly from your bank account rather than using your debit or credit card through a third party, such as Visa or Mastercard’; and Account Information Service Providers (AISPs) – ‘being an authorised AISP means that a company can access an individual’s bank account data from their financial institution with their explicit consent’.

The RM6301 webpage sets out the benefits of open banking (in general, as distinct from the benefits specifically of using the DPS) as including: reducing customer transaction costs ‘where card payments are the existing and only method of payment’; enabling payments to be made directly from bank account to bank account ‘without the need to repeatedly input details’; and that it ‘includes real-time bank account data to confirm payee account details reducing the risk of error payments and minimising losses due to fraud’.

The DPS provides three main ‘service areas’ – digital payments, account information and Confirmation of Payee (CoP) – which each contain sub-categories. The first of these, for example, includes: payments in; payments out; direct debits; the designing and building of a webpage that allows public sector organisations to make and/or receive payments. For account information, the DPS states that supplier services ‘may include’ fraud services; identity services; ‘income verification’ services; affordability services; ‘risk identification’ services; and ‘transaction/fund tracing and monitoring services’.

The RM6301 webpage adds that ‘existing customers of the Payment Acceptance framework can transition to Open Banking’. Public-sector buyers using this framework are procuring services that allow for card-based payments whereas open banking is non-card payments through the ‘account-to-account’ route.

‘The transition refers to [public sector] customers taking up the option to include non-card solutions either as part of their payment acceptance offering or by completely moving to non-card based solutions,’ a CCS spokesperson sought to explain to Global Government Fintech in December. ‘All suppliers [companies] must register to join the Open Banking DPS and go through the selection questionnaire regardless of inclusion on any previous CCS agreements.’

RELATED ARTICLE UK Government Digital Service to explore adding open banking to Gov.UK Pay – a news story (14 August 2023) based on a blog-post by Amanda Dahl, deputy director of digital service platforms in the Government Digital Service (GDS), which is part of the Cabinet Office

Aiming for pan-public sector take-up

The CCS’s motivations for encouraging open banking are in line with reasons previously shared with Global Government Fintech by HMRC. These have included saving on the resource associated with tracking down payments that fail to arrive because payers have entered their tax/payment reference or other information incorrectly (‘keying errors’), as well as saving on card-providers’ interchange fees.

In terms of the practicalities of how HMRC has embedded open banking from a user (payer) perspective, those opting to pay their tax to HMRC via open banking need to click on a website button titled ‘pay by bank account’ and ‘tick’ to provide consent for Ecospend to securely connect them to their online banking and initiate an authorised payment on behalf of HMRC (an ‘Open Banking Privacy Notice’ seeks to reassure users). The Ecospend-powered service uses validated and pre-populated payment details, enabling payments directly from a payer’s bank account.

When CCS’s DPS-related prior information notice was published, UK open banking advocates warmly welcomed the move. Simon Lyons, who worked with HMRC as the department ran its open banking procurement three years ago, told Global Government Fintech at the time that it was ‘a credit to UK government that what was initially a direct award [contract] with limited availability [HMRC’s Ecospend contract] is a now a premise that can be easily acquired by the entire public sector estate.’ Lyons is a former head of ecosystem engagement at OBIE and now works as chief strategy officer for open banking company OBConnect.io.

Individuals at CCS, which has more than 800 staff across five main locations in the UK, involved in the DPS include head of payments categories Lee Edmonds and agreement manager Sophie Lewis. The latter and CCS category lead for financial services Jamie Lancaster are members of the open banking working group. 

RELATED ARTICLE Public sector’s potential to drive open banking take-up highlighted at London event – a news story (17 October 2023) reporting on a panel discussion titled ‘Open Banking: The Future Is Now’ during an event organised by UK fintech trade association Innovate Finance


Global Government Fintech’s Open Banking / Open Finance topic section

REGISTER NOW CCS’s Lee Edmonds is among the speakers at the Global Government Fintech Lab 2024 – our one-day event in Dublin, Ireland, on Thursday 25 April is free to attend for public servants CLICK HERE TO REGISTER