HMRC estimates it has saved around £500,000 (approximately US$585,000) in public purse in bank charges since the department integrated Open Banking into its own operations nearly 18 months ago. On 24 March 2021 the UK Department introduced a ‘Pay by Bank Account’ option (button) compatible with Open Banking for people making self-assessment tax returns online – believed to be the first time that a government in the world is integrating Open Banking into its own operations, according to the aforementioned source. Payment of three other types of taxes through Open Banking – PAYE (Pay-As-You-Earn) payments (tax paid directly on workers’ wages), corporation tax, and value-added tax ( VAT) – was made possible shortly thereafter.
The department ended 2021 with 19 types of taxes payable by clicking this button. According to Global Government Fintech, HMRC has confirmed that, since the start of 2022, the department has added the option “Pay by bank account” to 24 other types of taxes. This represents a total of 43 types of tax now payable to the UK government by Open Banking.
By allowing people or organizations to make payments to government by this method, HMRC is working to make payments to government simpler and more secure, and to save government money. The treasury should save resources associated with tracking down payments that don’t arrive because payers mistyped their tax code or other information, as well as interchange fees charged by card providers. According to HMRC’s Head of Payments, quoted by Global Government Fintech, “Based on assumed customer behaviour, we estimate that Open Banking could have saved HMRC around £500,000 in bank charges since its implementation” . But its biggest advantage is to avoid payment errors such as input errors. Around one in 20 payments to HMRC require intervention, while Open Banking payments rarely do. This is good for our customers and creates additional savings for HMRC, which we use to further improve our payment customer service.
HMRC has partnered with Ecospend
HM Revenue and Customs announced in February 2021 that Open Banking provider Ecospend had been chosen to develop its next-generation payments infrastructure. In September 2020, HMRC launched a tender for a £3million contract to overhaul the group’s bank transfer process for customer payments, with the possibility of further Open integration Banking in the future. Ecospend’s filing sees the company contracted to provide ‘account-to-account’ payment software that enables HMRC to process payments or, to use its technical acronym, launch PISP (Payment Initiation Service Provider) services. Prior to 24 March 2021, individuals and organizations making payments to HMRC had to open their banking software (e.g. log into their online banking account) and manually make a payment by bank transfer, also entering their tax code.
Those who choose to pay their tax through Open Banking “tick” to give consent for Ecospend to connect them securely to their online bank and initiate an authorized payment on behalf of HMRC (an “Open Banking Privacy Notice” is intended to reassure users). The service powered by Ecospend uses validated and pre-filled payment details, allowing payments directly from a payer’s bank account. It’s this automation that proponents say increases speed, reduces human error (e.g., people mistyping their tax reference number), and has the potential to reduce fraud.
