Jeremy Light - pingNpay - London 03 February, 2021, 12:54 1 like

It would be great to know more about Ecospend - unusually for a Fintech there is no information on their website about their team. With such a high profile government contract, and in the spirit of Open Banking, transparency would be nice.

Still, this is a new area and it is great to see HMRC on the front foot offering direct-to-account payments. About 12m UK taxpayers complete a self-assessment, and assuming say 75% result in a payment, 9m payments or more could potentially be made through this service just from end-of-year self-assement payments. This is the type of addressable volume that could get consumers comfortable and familiar with OB payments, and for them to become repeat users across a variety of uses, both government and commercial.

It would be interesting to know the business model for the service and the range of use cases HMRC has in mind. Bank OB payment APIs are open/free, so the £3m  must be for the initial integration with HMRC systems (presumaby to format tax payer reference information into the API) plus I expect a volume-dependent service fee.

Since HMRC already accepts bank transfers from tax payers, there should be no additional and expensive reconciliation processes to develop (unlike merchants adopting OB where they are previously set up only for card payments) - key to the service will be reduced errors in  reconciliation of the UTR reference to the payment, which could even go to zero with this service (and by the sounds of it, a  key reason for the initiative).

In the commercial sector, for OB payments to gain adoption with merchants, they will need to be considerably cheaper overall than accepting debit card payments - this is a great opportunity for HMRC to pave the way for the industry in new payment acceptance business models that lead to this.

The procurement announcement required implementation within six weeks of the award, so assuming this has been kept, the service should be ready in March, although when HMRC choose to make it live could be later.

However, this announcement is further proof the OB payments market is gaining momentum and a new force in payments.  

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 04 February, 2021, 15:21 0 likes

@JeremyLight: 

Article implies that tax payments can currently be made only with debit and credit cards."submit payments direct from their bank accounts, rather than through debit or credit card."

Whereas your comment implies that tax payments can already be made from bank accounts. "Since HMRC already accepts bank transfers from tax payers,".

Going by the vague memory I have with my HMRC tax return 10+ years ago, I tend to agree with you. 

While interbank A2A payments is a prime use case for Open Banking, tax payments from bank accounts is a very compelling use case. I find it hard to believe that there was no solution for it until the launch of OB. 

For context, in India, the functionality being ordered by HMRC now has been supported on the websites of Tax Departments, TELCOs, Utilities and many other category of Merchants for over 15 years - well before UPI entered the scene 4-5 years ago.

Jeremy Light - pingNpay - London 04 February, 2021, 17:13 0 likes

@s_ketharaman

Your memory serves you well.

In the UK individuals can pay their personal tax electronically by direct debit (one off), online/telephone bank transfer, debit card or corporate credit card (and non-electronically by cheque in the post or in person at a branch).

The payment process is separate from the process to submit a tax return. If paying by online bank transfer (an option which has been around for some time, probably 10 years, even 20 years), you are given a choice of two HMRC bank accounts to pay into, one being a default if you are uncertain (which I suspect many people are as it is unclear how you find out the one to use). Some banks will have these HMRC details set up already, other banks require you set them up yourself as a beneficiary on your account - when submitting the payment, you need to include a payment reference which you construct as your 10 digit tax number (UTR) followed by the letter K.

So plenty of scope for payers to make errors - mistype your UTR, forget to add a K and send to the wrong HMRC account. These HMRC accounts are used for all types of tax payments (VAT, corporation tax etc), so I expect HMRC must have a huge reconciliation process to match payments in error. Since they receive millions of payments, it means 10,000 errors per error rate % per million payments, so quite a headache.

With OB, there is much scope to improve the customer experience as well as reduce errors. For example on submitting a tax return, connecting to your bank from the HMRC website (either in the same session or later), authorising the payment and that's it, without entering any information (with the amount and reference are formatted automatically).

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 05 February, 2021, 10:56 0 likes

TY @JeremyLight. 

The BankTransfer feature I was referring to in India works exactly in this new-HMRC way. On IT website, we select the bank, are taken automatically to the logon page of said bank's online banking portal, enter our NetBanking creds, see a form prefilled with all the details for the said payment, simply hit PAY button and come back to IT website and see the PAYMENT SUCCESSFUL message. Ditto other merchants enrolled for this method of payment. This is sorta like PULL mode. 

Since I didn't have to pay any additional Income Tax, I never experienced the payment part of the HMRC IT return process. From your comment, I take it that, as of now, only PUSH mode is supported i.e. from Bank to HMRC website. I'm quite aware of the payment failures and RECON problems inherent in that mode!

On a side note, a few years ago, there was talk about ENHANCED DATA, which would cut down the aforementioned RECON problem significantly. Any idea if this project has been implemented?

A Finextra member 26 March, 2021, 13:29 0 likes

Interesting. As a tax payer, I can already pay my tax via transfer as you point out subject to ref #s being correct. Reduced costs for OB naturally maybe the elephant in the room but we shall see how layered this is & the variation clauses. Some bills I want them to take my money as late as possible so I will still be sending them cheques thank you very much as I have for years. Plus if the user is not convinced to choose this method over all the existing ones, then the needle is not moved enough. Now there is something we are working on right now.