In March, our feed was full of news related to the Competition and Markets Authority (CMA). VRPs and open finance are important topics in 2022 as the ecosystem discusses the future of open banking.
The CMA and VRPs for sweeping
Whilst the CMA mandated the use of Variable Recurring Payments (VRPs) in July 2021, the schedule was revised as most of the banks did not have a realistic prospect of meeting the original deadline of January 2022.
Sweeping has many benefits, such as moving money between accounts to avoid using an overdraft. managing loan repayments by moving money from a current account or another form of credit, as well as moving money to a savings account that pays interest. Sweeping is one aspect of helping businesses deliver better outcomes for customers. Ultimately, it allows for improved money management, ensuring people take advantage of favourable interest rates and overdraft alternatives.
However, the CMA clarified that sweeping cannot be mandated for moving money to pensions or other investment products. Additionally, it cannot be used for purposes like e-commerce, cryptocurrency, gaming, gambling, or other international money transfers. Charlotte Croswell, Open Banking Implementation Entity Chair and Trustee said that the entity welcomed the clarity provided by the CMA. She added that it is looking forward to the new sweeping propositions coming to market later in 2022.
With this clarification, VRP will change open banking innovation. Nonetheless, this innovation can only happen as more VRP APIs become available. This will allow for greater experimentation and use cases.
Who will take over from the CMA?
Undoubtedly, the biggest news of March was the announcement of an entirely new Joint Regulatory Oversight Committee (JROC). The JROC will oversee the governance of open banking, taking over from the CMA. In this role, it will determine the regulatory framework of open banking and open finance.
The statement was published at the end of March by the HM Treasury, the CMA, the Financial Conduct Authority (FCA) and Payments Service Regulator (PSR).
According to AltFi, the JROC will help transition the OBIE into a new entity. However, some open banking providers said the current mix of regulations made it difficult, if not impossible, for FinTechs, banks and providers to plan. Open banking providers called for the creation of a formal open finance framework. It’s clear that additional guidance will decide the future role of the OBIE. This will help accelerate adoption and promote better access to products and services across the ecosystem.
Other providers called for the development of variable recurring payments (VRPs) beyond sweeping. Furthermore, this will promote competition and give UK consumers a wider selection of financial services products and services.
Whilst the ecosystem welcomed the news, questions remain about the future of open finance.
Revolut comes to Ireland
Following its expansion across Europe, Revolut is now available to over 1.7 million Irish customers. In other words, this represents about a third of the country’s population.
In 2021, the European Central Bank awarded Revolut a full banking licence, which it will use in Ireland as opposed to the e-money licence it secured from the Central Bank of Ireland. By launching the bank in Ireland, it will provide greater levels of security and confidence for its Irish customers. Furthermore, the launch will allow the bank to release new products and services.
The bank is now live in 30 countries. With over 18 million customers globally, it claims the title of one of the fastest-growing FinTech companies in Europe. As a result, its customer-centric approach has allowed it to grow quickly. With no hidden fees, Revolut is continually building new financial products.
Apple acquires Credit Kudos
Apple’s acquisition of UK-based FinTech Credit Kudos is predicted to accelerate payments and innovation in the ecosystem. Open banking technology allows lenders to access consumers’ financial information. This helps them make more informed decisions. According to Business Insider, Apple has plunged deeper into payments over the past few months as it expands its capabilities to drive revenue in a ‘high-growth’ market. Global payment revenue will reach $2.9 trillion in 2030, after achieving $1.5 trillion in 2021.
Mastercard launches open banking tools
Mastercard is launching a pair of open banking tools to improve predictability and transparency in digital account-to-account payments for merchants. These tools include the Payment Success Indicator and Payment Routing Optimiser, which use data analytics and machine learning for an improved payment experience that is both safer and smarter. Whilst these tools will be available later in 2022, Mastercard’s tools will reduce returned payments, improving customers’ digital payment experience.
NatWest enters the BNPL sector
NatWest plans to launch its own ‘buy now, pay later’ scheme, which makes it the first high-street bank to move into alternative credit. The scheme allows customers to split their purchases into several payments, which mimics the experience of Klarna and Clearpay, but is safer. The bank will put in safeguards to ensure lending is affordable and that transactions will be covered by all the protections granted by a fully regulated bank. As a result, credit scoring and affordability checks will also be included.
In late 2021, Barclays announced that Amazon’s UK customers can apply for a reusable credit account from Barclays to spread the cost of purchases in equal monthly instalments. Without a doubt, the BNPL sector shows no signs of slowing down. More than 2.5 million new people in the UK used a BNPL service over 10 months in the last year alone. However, concerns remain about alternative lending as it encourages people to spend more, leading to greater debt. Nonetheless, this will change as the FCA steps in to regulate the sector.
Additionally, NatWest made headlines with its Carbon Tracker app, a pilot geared to SMEs in manufacturing and transportation, helping them find ways to reduce their footprint. The bank launched its carbon tracker for retail customers in 2021.
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