By Oliver Smith on Wednesday 28 July 2021
A new open banking super-power is coming soon.
The Competition and Markets Authority has given the UK’s nine largest banks six months to enable variable recurring payments (VRPs) and ‘sweeping’ through their open banking APIs.
‘Sweeping’ is essentially the automatic transfer of money between a customer’s accounts which, according to the Open Banking Implementation Entity (OBIE), could have a hugely positive impact on people’s financial habits.
“There's the benefit of getting more interest on your money, there's a benefit of paying less interest on your lending balances, and there's the benefit of encouraging the savings habit,” the OBIE’s head of policy Alan Ainsworth told AltFi.
In the future, this could all be handled via a VRP which, as the name suggests, can be quickly changed without waiting days for a direct debit to update.
“Many people have savings or investments accounts—such as ISAs—but leave positive balances in their low-interest current accounts because it’s time-consuming to manually transfer funds out,” said Matt Parish, senior Product Manager at TrueLayer.
“Sweeping will enable [third party providers] to automate this job, making customers’ money work for them effortlessly, and increasing financial well-being at the same time.”
VRPs also open the potential for a direct debit-less future, depending on whether banks decide to embrace and expand the technology beyond sweeping.
“It is now for them to decide whether they will choose to come to commercial arrangements with third parties to use that variable recurring payment API for purposes other than sweeping,” Ainsworth told AltFi.