HMRC has signed a £3m contract for open banking services, the government’s largest to date, with start-up fintech Ecospend, in a bid to streamline its payment processes and reduce errors
In September last year the department put out a tender for payment initiation and account information services, saying it was overhauling HMRC’s bank transfer process for taxpayer payments, which was described as currently ‘non-automated’.
Ecospend, which has been awarded the work, said the contract outlines HMRC’s future needs to streamline and automate parts of its payment processes to reduce errors, reduce fraud and improve ease of use for all UK taxpayers and users of HMRC web services, as well as reducing costs for HMRC itself.
The fintech said that currently, HMRC’s bank transfer journey is not integrated with its online services. This means that taxpayers must open their own banking software and manually set up a bank transfer payment. As a result, mistakes can occur, opening the possibility that an incorrect reference is used for payment.
Ecospend will provide its account-to-account payment software, allowing HMRC to process payments through the use of open banking/PSD2.
Under this approach, payments are sent directly from a payer’s bank account, using validated HMRC details to address the problems with incorrect references, meaning in addition to cost savings, increased speed and less human error, this system has the potential to reduce fraud, as money is transferred without the need to share card or bank details.
Simon Lyons, head of ecosystem engagement at the Open Banking Implementation Entity (OBIE) said: ‘In this instance, the use of open banking technology will revolutionise the consuming manual process of filling in tax returns and will dramatically streamline the processes through automation.
‘It is also just another example of the potential of open banking to provide a tangible benefit to consumers. This effort will also serve to deliver on ministers’ policy intentions to increase the overall capability of and competition in the UK’s banking and payment systems.’
Founded in 2017, Ecospend has built its technology from the ground up specifically for open finance. The 50-person company has been operating in ‘stealth mode’ until late last year when it pitched for the HMRC tender.
Metin Erkman, founder and CEO of Ecospend said: ‘Since founding Ecospend, we have spent the last three years focused on building our underlying technology and API in-house.
‘But, this is just the first step, we understand if we’re really looking to deliver on the promise of open banking, innovation needs to happen at an ecosystem level.’