HMRC and ‘Open Banking’ Payments
Open Banking is a ground breaking concept in finance and requires traditional banks to share data with licensed financial technology (‘fintech’) companies, subject to consumer consent. It seeks to remove those barriers which hinder accounts held with different building societies, banks and other providers from working seamlessly together by safely sharing account information.
Whilst originating in Europe, Open Banking in the UK is a government led response to companies struggling to operate efficiently against a background of slow, fragmented financial systems restricting access to real-time data at a time when customers demand faster and seamless financial transactions.
Since 2018, the UK's major banks are required to share financial data with approved third-party suppliers. Open Banking is easy to access, does not require the completion of lengthy forms and can be accessed directly. It is available to those who elect to ‘opt in’ and is not compulsory. If a customer elects to participate but then has a change of mind, permission can be withdrawn at any time.
Open Banking enables ‘fintech’ providers, banks, online retailers and other companies to create innovative new apps, services and products thereby boosting competition and promoting transparency and innovation in financial services.
Simply put, Open Banking provides the free flow of information between financial institutions and authorised outside parties intended to provide greater transaction efficiency.
It is estimated that in the UK over thirteen million consumers and small businesses are using Open Banking technology which contributes in excess of four billion pounds to the economy. Around sixty jurisdictions around the world have adopted the UK’s approach making it a global leader in financial innovation.
Open Banking is still very much in its development stage as it continues to develop innovative procedures for the benefit of consumers. Already HMRC and crypto-currency trading have engaged in the opportunities available.
Nazaqat Maqsoom a Legal Director at KANGS comments upon Open Banking generally.
Potential Advantages of Open Banking
Greater control
Open Banking legislation was created with the intent of providing customers with absolute control over their financial information. Security is integral to Open Banking with all data being retained securely and safely.
Modern APIs ensure that login details and passwords are only accessible to the individual who created them. An API is an Application Programming Interface i.e. a set of protocols that enable different software components to communicate and transfer data.
The customer has total control over who can access their banking data and the level of such access making sure that only relevant information is available to a third party.
Personal Finance Management
Consumers have more choices when considering a financial services provider and can control the level of personal information which can be shared. Historically, customers were nearly always beholden to the influence of their chosen main line bank.
Data from multiple bank accounts can be accessed from one source enhancing prompt financial planning, decision making and transfer of funds.
New service providers to the market are introducing inventive personalised banking apps.
Making payments and tracking the funds in an account through, for example, accounting software, virtually instant and freed of the level of paperwork previously required. Modern analytics enable immediate personal proactive advice on spending, budget control and management of affairs.
Open Banking and Cryptocurrency
There are now many forms of cryptocurrency such as Bitcoin, Ethereum, Ripple and Litecoin. Crypto is used by individuals and businesses for purposes such as investment, remittances and a means of exchange.
Crypto currency exchanges are expected to adopt Open Banking across multiple platforms within the UK. Open Banking, through its ability to streamline processes through APIs, offers the cryptocurrency ecosystem opportunities for more innovation. Procedurally, a cryptocurrency purchaser has to transfer money to their chosen exchange, a procedure which Open Banking can simplify.
Additionally, Open Banking can positively streamline lending through a cryptocurrency lending platform by aggregating financial data and analysing a borrower’s credit history in just a few minutes, as opposed to the relatively lengthy current process.
Open Banking can provide speedy anti-money laundering processes and ‘Know Your Customer’ steps, both of which are important for cryptocurrency compliance.
HMRC & Open Banking
HMRC has completed its roll out of Open Banking across all tax payment types capable of supporting it and continues to integrate Open Banking technology into its services. The UK Government is believed to be the first in the world to have embedded Open Banking within its own operations.
The rollout covers nearly one hundred per cent of people and organisations paying tax.
HMRC is striving to make payments to it simpler, safer and more efficient by saving on resources lost to the Public Purse though tracking down payments that fail to arrive through payers inadvertently providing incorrect identification details.
How Can We Assist You?
As this article seeks to explain, the advancements in technology continue to affect all aspects of modern society and will, of course, continue to do so. It is difficult to envisage Open Banking, as it develops, not becoming the bedrock of every day banking and its aspirations of openness and efficiency spreading across all facets of business and commercial trading across the world.
The team at KANGS is constantly alert to all changes in the law to ensure that we are, at all times, fully prepared to advise our clients under investigation or in disputes with HMRC or regulatory bodies such as the Financial Conduct Authority (FCA).
Whatever the nature of the problem with which you are confronted, you can be assured that our team is here to advise and provide legal support. Please feel free to reach out to our team using the details below, who will be happy to hear from you.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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