More than 20 fintech companies have criticised the UK’s competition regulator over a lack of clarity in defining and implementing an open banking mechanism for recurring payments.
An open letter – signed by companies including Volt, GoCardless and Plum – calls on the Competition and Markets Authority (CMA) to define variable recurring payments, an alternative to Direct Debit or a continuous payment authority.
Variable recurring payments (VRP) are a form of payment instruction that allows customers to connect payments service providers to their bank accounts, which lets providers make a series of payments on their behalf.
The letter, sent on Monday, expresses concerns from the sector over delays from the CMA in “the definition and implementation timeline of variable recurring payments for sweeping.”
The companies, along with industry body Innovate Finance, explained that without clear communication for the implementation deadlines, fintechs are at risk of losing clients by not allowing them to benefit from VRP.
Maria Palmieri, head of public policy at Yapily, one of the signatories, described its concerns to UKTN: “Failure from the regulators to move swiftly, specifically when it comes to VRP and the road to open finance, will create a barrier to innovation for open banking providers and their customers.”
Open banking payment: ‘Uncertainty will prevail’
The letter also expressed concern at the delay in the publication of the CMA’s plans for the future of the open banking implementation entity (OBIE).
OBIE was established in 2017 by the CMA, following a report from the department on the UK’s banking market. The report recommended the implementation of open banking, which has helped newer banks and fintechs to compete in the market.
The letter described a “lack of clear direction” that means that “uncertainty will prevail”. This, the letter added, could lead to the UK being at risk of losing its position as a world leader in open banking.
Ralph Rogge, CEO of Crezco – another firm that signed the letter – told UKTN: “We’ve built a great ship” but “the ship only fulfils a fraction of its original purpose”.
He added: “The open banking project needs clear and strong leadership to achieve its full potential, something presently lacking”.
The letter concluded with a “call for progress on these two issues to be urgently expedited” to give “certainty on the future direction of open banking”.
A spokesperson from OBIE told UKTN: “The CMA, regulators and policymakers will soon be making key decisions on the future of open banking, open finance and other smart data initiatives.
“We need to maintain the UK’s position as a leader, and leverage open banking assets, infrastructure and technology to help deliver open finance and drive growth in other sectors”.
The CMA responded to the letter by publishing a clarification of the definition of VRP for sweeping.
The open banking recurring payment uncertainty is the latest clash between fintech companies and UK regulators.
Earlier this week, fintechs, banks and payment providers expressed concern that UK merchants are unprepared for stricter online shopping security checks that have come into force.