The number of suppliers on a ‘dynamic purchasing system’ designed to facilitate the use of open banking across the UK public sector has reached 20 companies, six months after its launch.
The ‘Open Banking Dynamic Purchasing System (DPS)’ has been created 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’.
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 then. Global Government Fintech reported that five companies had appeared by 20 February (six weeks after its launch) – a number that we can report today (15 July) has since quadrupled.
Mastercard Europe and Lloyds (Banking Group), as well as open banking platforms (companies) including Tink, TrueLayer and Yapily, are among the firms to have appeared alongside the first five companies – NatWest, Ecospend, Moneyhub, OneID and the Smart Request Company (Ordo) – on the list.
OPEN BANKING: EXPLAINED Open banking, and its sibling concept open finance, are being encouraged by governments worldwide, in different ways and at different speeds, as a means of boosting innovation and competition in financial services. It is a reference to users sharing their data with third-parties (for example, fintech companies). ‘Open’ refers to open application programming interfaces (APIs): software intermediaries that allow two machines to interact. Global Government Fintech’s focus is on its potential to improve public service delivery.
RELATED ARTICLE UK public sector open banking aspirant supplier tally edges upwards – our news story (20 February 2024) on the number of suppliers on the DPS reaching five
20 companies on RM6301
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.
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.
The prior information notice, which was published on 8 June 2023, noted that suppliers must have Financial Conduct Authority (FCA) authorisations to provide open banking services.
The further new additions to the DPS since Global Government Fintech’s 20 February report are: Allpay, CRIF RealTime, Equifax, GoCardless, GPUK LLP, Modulr FS, Obrenza, PayPoint Network, Sentenial and TransUnion International UK. (Global Government Fintech reproduces the full 20-strong list at the end of this article for ease of reference)
RELATED ARTICLE UK public sector open banking ‘dynamic purchasing system’ opens for business – our news story (12 December 2023) on CCS launching RM6301
Taking on card payment fees
Mastercard’s appearance as one of the 20 companies on the list is particularly noteworthy given CCS’s stated motivations for encouraging open banking.
Specifically, 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’.
Explaining the decision to create the open banking DPS, 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 announcement continued. ‘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 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.’
RELATED ARTICLE UK government backs open banking with £100m-a-year eight-year supplier plan – our article (14 June 2023) on CCS’s plans to create the DPS
Questions to answer
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 open banking 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.’
Global Government Fintech’s Open Banking / Open Finance topic section
‘Exciting emerging market’
CCS had been exploring the possibility of creating the open banking DPS for more than 18 months ahead of its launch, 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 2023 with the DPS ‘anticipated to go live for use in the autumn’ (2023). 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.’
CCS chief executive Simon Tse (who is retiring shortly) said in December 2023 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 HMRC re-tenders open banking contract via new UK public sector purchasing system – a news article (21 February 2024) on HMRC’s intention to use the open banking DPS as it looks to award a successor contract to its pioneering appointment (three years prior) of Ecospend
DPS: relatively small in size
The open banking DPS remains a relatively small DPS in terms of the number of companies on it.
For example, at time of writing, a DPS known as ‘Spark’ has 342 suppliers (up from 335 in February 2024); a DPS on AI services has 290 appointed suppliers (up from 243 in February 2024); and a ‘Digital Inclusion and Support’ DPS has 47 appointed suppliers (up from 44 in February 2024).
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.
Individuals at CCS, which has more than 800 staff across five main locations, involved in the open banking DPS include head of payments categories Lee Edmonds and category manager (fuel cards and open banking services) Sophie Lewis. The latter and CCS category lead for financial services Jamie Lancaster are members of the open banking working group.
Those involved are understood to be satisfied with the number of suppliers to have so far appeared on the live webpage, particularly given that further companies will be able to attempt to join the throughout its eight-year span; and that the DPS contains solid representation across different service areas.
RELATED ARTICLE Payment principals: public sector leaders map out financial innovation agenda – a write-up of a session on ‘Public sector financial innovation through payments technology’ at the Global Government Fintech Lab 2024 (25 April): CCS’s Lee Edmonds was one of the speakers
Discussions about potential use
CCS has held discussions with several central government departments, as well as organisations from the wider public sector, about their potential use of the open banking DPS.
But public sector organisations wanting to procure open banking services are not obliged to use it.
To date, just one example has emerged of a public sector organisation doing so: HM Revenue & Customs (HMRC), which engaged Ecospend to enable the department to receive payments via open banking in March 2021.
HMRC has been re-tendering its open banking arrangements through the DPS as the Ecospend contract was awarded on a ‘two years with one-year extension’ basis, running to 29 February 2024. The department has been continuing to use Ecospend since 29 February, lest it be left with a supplier void. The company is keen to win the new contract.
An HMRC spokesperson told Global Government Fintech in February that the department was ‘looking forward to making use of the CCS Dynamic Purchasing System from next month [March] and awarding the contract to the successful supplier later this year.’
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
UK’s open banking leadership
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.
HMRC’s engagement of Ecospend is a government use case for open banking that made the department, and the UK more broadly, a global pioneer in respect of public sector use.
HMRC’s head of open banking payments, Rachel McLaren, speaking at the Global Government Fintech Lab 2023 event (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, 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 – engaged by HMRC.
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
Welcome development
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 first open banking procurement three-and-a-half 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.
CCS announced three months ago (19 April) that Tse would be succeeded as chief executive by Sam Ulyatt. She started at CCS last week (8 July), moving from the Home Office where she was chief commercial officer, and is having a handover period with Tse.
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’ (see section below)
Private-sector support
The trade association for the UK fintech sector, Innovate Finance, included ‘promoting public sector adoption of open banking’ among its recommendations in a ‘FinTech Plan for Government’ published last week in the wake of the election of the UK’s new Labour government.
‘Work by the Government Digital Service to extend Open Banking payments, successfully introduced by HMRC, to other government services is very welcome and a great way of developing consumer familiarity and trust,’ the 40-page document noted.
‘The government should set out a clear and ambitious plan for extending Open Banking payments to other government services and the wider public sector – such as the Driver and Vehicle Licensing Agency, Passport Office and local authorities,’ the trade body urged.
Government’s ability to drive growth in open banking through procurement was also hailed during a panel session titled ‘Open Banking: The Future Is Now’ at a one-day conference organised by Innovate Finance in London on 5 October last year.
The trade body’s chief strategy officer (then director of policy), Adam Jackson, described three ‘ingredients’ for the UK’s relative success to date in developing an open banking ecosystem, including government ‘embracing’ it through public sector use of the technology. ‘HMRC [using open banking] is a fantastic example: it’s got people using open banking payments, trusting it [open banking],’ Jackson told the audience. ‘Looking forward [we] want to see more of that: I want to be able to pay my council tax, my car tax [and so on] by open banking, so the more government extends that the better.’
Crown Commercial Service ‘Open Banking Dynamic Purchasing System (DPS)’
Appointed suppliers
AllPay
CRIF RealTime
Ecospend Technologies
Equifax
GoCardless
GPUK LLP
Lloyds
Mastercard Europe
Modulr FS
MoneyHub Financial Technology
National Westminster Bank
Obrenza
OneID
Paypoint Network
Sentenial
The Smart Request Company
Tink Financial Services
TransUnion International UK
TrueLayer
Yapily
Source: UK government ‘Open Banking: Appointed suppliers’ webpage on 15 July 2024
