Article

How open banking can help the public sector cut costs

17 May 2024

Open banking has helped to deliver cost savings and operational efficiencies across many public sector organisations – and there are more opportunities to come. Richard Newman, OBL Corporate Affairs Director, sets out some of the benefits in this article for Government Business. These include:

Tax collection

The UK is a world leader in open banking, and His Majesty’s Revenue and Customs (HMRC) was the world’s first tax authority to offer open banking as a way to pay tax. HMRC launched the service back in 2021, in conjunction with fintech firm Ecospend-Trustly.  

It’s now possible to pay more than 40 different types of tax and duty via open banking, including PAYE, corporation tax, and VAT, and it’s now the third most popular way for individuals and businesses to pay their taxes, after bank transfers and Direct Debit.

Cutting the cost of receiving rental payments

Open banking has a part to play in supporting rent collection for local authorities, housing associations and educational institutions. Offering open banking as a payment option enables cost savings on card processing fees, as well as reduced operational expenditure and time spent on administration.

Procurement via the Crown Commercial Service

A new service, launched by the Crown Commercial Service (CCS), the department that supports the public sector in delivering commercial value when procuring common goods and services, offers further opportunities for cost savings.

Its Open Banking Dynamic Purchasing System (DPS) operates as a ‘vehicle’ for central government and the public sector to source open banking services, helping to reduce the cost of receiving money into public sector organisations.

By reducing the fees incurred by traditional debit card payments, it’s estimated that the DPS could help achieve savings of 70-80%. The services will also help reduce the volume of fraudulent or in-error payments made throughout the public sector.

At the time of writing, the first five firms listed on the DPS were Ecospend-Trustly, GoCardless, MoneyHub, NatWest Bank, OneID, and Ordo (the Smarter Request Company). Just six months on from its launch, there are now 20 companies listed on the appointed suppliers register for the system.

Speeding up debt advice

Local authorities often work closely with debt charities to refer residents for support and advice in managing their finances. Using open banking data connections to assess an individual’s finances can give debt advisers an up-to-date picture of a client’s finances and help with signposting them to relevant professional advisory services.

Citizen’s Advice Stevenage pilot project with PayPoint lets debt advisers access a consolidated view of client funds that enables debt advisers to quickly access a consolidated view of their incoming and outgoing funds within minutes and provide actionable advice.

Read the full article in Government Business