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HSBC Leads CMA9 in VRP Implementation With Debut of New Service for Open Banking Customers

In its latest announcement, this week HSBC UK confirmed that it is to introduce sweeping variable recurring payments (VRP) to all its business and personal accounts that use open banking; being the first UK bank to make this move. The service rollout will be overseen by the Open Banking Implementation Entity (OBIE).

Sweeping VRPs apply to automated recurring payments set between an external provider and a specific bank account, in this case, HSBC’s.

The technology could apply to any instance where recurring payments are being made through the use of open banking, for example, when repaying a loan or satisfying savings requirements.

VRPs allow these types of transactions to occur without requiring the account holder to re-authenticate every transaction. Likewise, customers are able to decide the amount, scope and expiry date of the VRP, through a process that advocates wider transparency and control when compared to traditional alternatives.

As one of the first UK banks to implement sweeping VRPs at this level, HSBC, along with eight other industry players, has been strongly encouraged by the Competition and Markets Authority (CMA) to make implementation.

The deadline to do so had previously been pushed back from January to July 2022, after the OBIE wrote to the CMA explaining that “most if not all the CMA9 do not have a realistic prospect of meeting the target of implementing VRPs for sweeping by 31 January 2022.”

For reference, the CMA9 describes the nine largest banks in the UK in terms of current account providers, with the group including Allied Irish Bank, Bank of Ireland, Barclays, Danske, Lloyds Banking Group, Nationwide, NatWest Group and Santander; alongside HSBC.

George Miltiadous, HSBC UK’s head of open banking channel management, explains how sweeping VRPs “allow for the automated movement of funds between a customer’s own accounts without the need for any manual intervention once the initial consent is set up.

“This service can, for example, be used to pay off a monthly credit card bill, move money regularly into a savings account, or to reduce an overdraft balance.

“HSBC has embraced open banking as an opportunity to innovate and bring the best services and products to our customers. We’re looking forward to working with Third Party Providers to drive Sweeping adoption for the benefit of consumers across the UK.”

“The CMA’s decision in line with OBIE’s advice is a win for competition and innovation, which 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,” added the OBIE’s implementation trustee Imran Gulamhuseinwala.

Implementation with third-party providers

As part of their journey to implementing sweeping VRPs, the CMA9 are required to provide API access to third-party providers; a small print that aims to facilitate the easier transferal of funds between various financial service providers.

Among those leading the way are the likes of GoCardless, Plaid, Yapily and Truelayer, all of which are slowly introducing VRP offerings on the road to open banking.

GoCardless has been active in the VRP space since 2019 when it took the first live transaction through a sandbox developed by the OBIE.

Back in May of this year, the personal finance app Nude announced its intention to leverage VRPs, partnering with the online payment processing solution of GoCardless to power the payments for its users to save and invest for their first home deposit.

Then in June, both GoCardless and Plaid each announced sweeping VRP services, with supporting developer docs and a sandbox for merchants to test their VRP preparedness.

Likewise, the open banking payments provider TrueLayer, announced the launch of an API supporting both sweeping and non-sweeping VRPs in May of this year.

Siamac Rezaiezadeh, Director of Product Marketing at GoCardless
Siamac Rezaiezadeh, director of product marketing, GoCardless

“We’re excited to see the first UK bank come online with VRP,” comments Siamac Rezaiezadeh, director of product marketing at GoCardless.

“We’re one step closer to helping merchants realise the benefits of instant, recurring bank payments, and enabling consumers to save more and pay down debt — top priorities for all of us during this cost-of-living crisis.”

“Three things need to happen next,” Rezaiezadeh continues. “First, we need to drive greater adoption of VRPs amongst businesses that fall within the sweeping use case.

“Second, we want to see more banks launching VRPs to their account holders. Only then can we spread the benefits of VRPs to as many people as possible.

“And lastly, everyone in the ecosystem needs to promote this technology to drive consumer awareness. This will all take time, but this announcement from HSBC is proof positive that we are moving in the right direction. We hope more banks will follow on soon.”

Author

  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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