UK competition watchdog defines sweeping

The Competition and Markets Authority (CMA) has clarified the definition of sweeping in a letter to the Open Banking Implementation Entity (OBIE).

The move comes after a decision by the authority in July last year to mandate the use of Variable Recurring Payments (VRPs) as the mechanism for implementing sweeping under item A10 of the Open Banking Revised Roadmap.

The regulator said that VRPs 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.

In summer 2021, the CMA agreed that the OBIE’s proposed definition of sweeping was appropriate. The definition stated that the source account needs to be a personal current account (PCA) or business current account (BCA), the destination account is any account into which a domestic payment can be made by the payer’s bank’s direct channel, both accounts are UK sterling accounts, 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, and the transaction is between two accounts belonging to the same person or legal entity.

However, there had been some confusion around the definition with differing views from stakeholders about whether certain use cases fell within or outside scope of the definition.

The CMA also highlighted that it could 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 and associated consumer detriment identified in the report.

The letter said that, with this in mind, there were a number of use cases clearly within scope of sweeping under the Order and that fall within the Roadmap, including: Sweeping between current account providers, including to move funds between current accounts to avoid falling into overdraft on another current account; sweeping to destination accounts which are used for unbundling overdrafts from a current account and other alternative forms of credit that closely compete with overdrafts; sweeping to destination accounts which are used for loan repayments as part of a service that provides alternative forms of credit to an overdraft; sweeping to a credit card account; and sweeping to cash savings accounts that are capable of paying interest.

The OBIE, which creates software standards and industry guidelines to “drive competition, innovation and transparency” in UK retail banking, welcomed the news.

“We welcome the clarity provided by the CMA today and look forward to the new sweeping propositions coming to market later this year,” said Charlotte Crosswell, OBIE chair and trustee. “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 CMA asked that the OBIE “further consider the implications of including e-money accounts when used as current accounts within the scope of sweeping.”

In particular, it added, it wants the organisation to consider any potential unintended consequences of the inclusion of e-money accounts, and also keeps under review any material difficulties that arise from including e-money accounts, such as any difficulties delineating between the circumstances where an e-money account is used as a substitute for a current account, and the out-of-scope used cases, including e-commerce.

Jack Wilson, Head of Public Policy at TrueLayer:

“While it is encouraging to see the CMA once again acknowledge the value of VRP in creating fairer financial markets, we are also concerned that the full potential of VRP products and services is limited not by technology, but by the legal powers which CMA can execute," commented Jack Wilson, head of public policy, TrueLayer. "We are determined to see the benefits of VRP realised as broadly as possible, and will continue to explore ways to do this.

"In that regard, we also stand ready to work with the relevant authorities and the broader FinTech sector to ensure that the value of VRP can become a reality for all UK consumers."

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