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CMA mandates Variable Recurring Payments for Sweeping

The Open Banking Implementation Entity (OBIE) has announced that the Competition and Markets Authority (CMA) has upheld, in line with the Trustee’s recommendations to mandate Variable Recurring Payments (VRPs) as the mechanism for implementing sweeping.

The CMA published a letter to the Implementation Trustee that stated: “Making effective provision for sweeping is an important element of the Open Banking remedy and it is important that sweeping provisions include the ability to move funds out of current accounts into accounts earning a higher rate of interest, and conversely enables customers to access alternative and cheaper sources of short-term credit.”

Simply put, sweeping is the automatic transfer of money between a customer’s own accounts, such as moving excess funds into a separate savings account or using them to repay a loan or overdraft account.

VRPs allow customers to safely connect authorised payments providers to their bank account so that they can make payments on the customer’s behalf within agreed parameters that offer more control and transparency than existing alternatives.

This decision means that the largest UK current account providers will have to implement VRPs within the next six months and allow free access to third party providers who are using VRPs to enable their customers to move money from their current accounts to other accounts.

Example Variable Recurring Payments journey from a user perspective

“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,” explains Imran Gulamhuseinwala OBIE.

“The OBIE will now mandate variable recurring payments for the purpose of sweeping, which is the automatic movement of money between an account holder’s different accounts. We like to think of it as the smarter version of direct debit payments.

This is a major step forward in payments, giving consumers more control over their money whilst also protecting them from incurring unwanted fees. It will, for example, allow surplus money to be automatically transferred from a current account to a savings account to help build a savings pot or to an overdraft or loan account to help the customer keep their borrowing costs to a minimum.

We are especially delighted as this is the last major piece of functionality to be delivered under the CMA’s open banking remedies. Over the past five years, we have built a thriving open banking ecosystem that already benefits nearly 4 million people and is growing rapidly.

We look forward to the outcome of the CMA’s consultation on the future governance of open banking, which we hope will allow us to continue delivering world-leading innovation to the benefit of consumers, SMEs and the industry.”

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