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CMA clarifies definition of Variable Recurring Payments for Sweeping

In July 2021, the CMA mandated the use of variable recurring payments (VRPs) as the mechanism for implementing sweeping under item A10 of the Roadmap (the July letter). In the July letter, the CMA also agreed that the OBIE’s proposed definition of sweeping was appropriate:

  1. Variable Recurring Payments for Sweeping

    The source account needs to be a personal current account (PCA) or business current account (BCA).

  2. The destination account is any account into which a domestic payment can be made by the payer’s bank’s direct channel.
  3. Both accounts are UK sterling accounts.
  4. The payments can be an unattended payment, not requiring any interaction by or presence of the payment service user at the time of making the payment.
  5. The transaction is between two accounts belonging to the same person or legal entity.

During the OBIE’s consultation on the standard version 3.1.9, concerns were raised by some stakeholders that there was some ambiguity in the above definition of Sweeping, with differing stakeholder views as to whether certain use cases fell within or outside scope of the definition.

At the December Implementation Entity Steering Group (IESG) meeting, the CMA committed to providing its views to the OBIE on these issues to help resolve any ambiguity.

Variable Recurring Payments for Sweeping are an important mechanism which allow for the development of innovative products and services to help further open up competition in the retail banking market and to benefit consumers.

In reviewing the submissions provided to the OBIE earlier this year, they were encouraged by the range of ambitious use cases envisaged for VRPs by the industry and are confident that VRPs for sweeping will be an important step towards the realisation of many of these broader use cases – either through commercial arrangements or future regulatory intervention.

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

The scope of the market investigation and Final Report was set by the Terms of Reference for the market investigation.

Some stakeholders have submitted that Sweeping destinations within item A10 of the Roadmap should be ‘use agnostic’ (i.e. Sweeping to any destination account which fell within the above definition should be within scope of the Order).

As noted above, the CMA can only mandate sweeping access which address the AECs and associated consumer detriment and therefore sweeping access cannot be mandated on a ‘use agnostic’ basis.

Although the CMA recognises the potential benefits of having a wider application of VRPs and sweeping services more generally, to mandate sweeping in such a manner would be outside the scope of the CMA’s legal powers.

The rest of the paper sets out the CMA’s views on the objectives of Sweeping as set out in the Final Report.

The report then consider the specific use cases identified in the submissions made to the OBIE by reference to those objectives, setting out the CMA’s views on which use cases fall within and outside of the approved definition of sweeping.

The full report can be found HERE


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