UK’s CMA Clarifies Variable Recurring Payments to Foster Open Banking

In July 2021, the U.K. Competition and Markets Authority (CMA) mandated the use of variable recurring payments (VRPs) as a mechanism to allow the automatic transfer of money between a customer’s own accounts (known as Sweeping).

Sweeping was one of the remedies adopted in 2017 by the CMA to foster open banking. Meanwhile, VRPs allow consumers to connect payments providers to their bank account so that they can make payments on the customer’s behalf within agreed parameters.

However, during a consultation, some stakeholders raised concerns about what use cases fall within the definition of Sweeping, and therefore, within the legal mandate. To provide further clarity, on March 14, the CMA published its view on which cases are included in the definition and which ones are not.

Currently, the main cases where Sweeping can be mandated are regarding moving money between current account providers, including moving funds between current accounts to avoid falling into overdraft on another current account.

Additionally, it applies to moving money to accounts which are used for unbundling overdrafts from a current account — and other alternative forms of credit that closely compete with overdrafts — to accounts which are used as loan repayments as part of a service that provides alternative forms of credit to an overdraft and to move money to a credit card.

However, the CMA can only mandate access under the Retail Banking Market Investigation Order 2017 for use cases that constitute Sweeping as envisaged by the Retail Banking Market Investigation Final Report, and which address the adverse effects on competition identified in the Final Report.

That means that the CMA can only mandate Sweeping for the use cases identified in the Order 2017, despite the new use cases for which Sweeping could be used today. While the CMA said it recognizes that there are a number of potential use cases for VRPs, which may lead to more innovative use cases developing over time as the market evolves, they fall outside of the scope of the Order 2017.

The list of potential use cases for the future includes making eCommerce purchases, moving money to accounts used for the purchase of cryptocurrency and similar assets, moving money to use for online gambling and gaming services, and moving money to accounts used for foreign exchange or international money transfer services.

There are other uses — such as those referring to eMoney accounts when used as current accounts — that need further consideration, and the CMA is asking the Open Banking Implementation Entity (OBIE) to explore the implications of including these accounts within the scope of Sweeping.

In response to the guidance, Charlotte Crosswell, OBIE chair and trustee, said: “We welcome the clarity provided by the CMA today and look forward to the new Sweeping propositions coming to market later this year. Delivering better outcomes continues to be a key focus of our innovative ecosystem and Sweeping is a great example of how consumers and SMEs can make their money work harder with better interest rates and overdraft alternatives.”

The OBIE will now progress plans with those banks subject to the CMA Order (the CMA9) and Third-Party Providers (TPPs) to test Sweeping using Variable Recurring payments in a Managed Roll Out (MRO).

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