Government Digital Service engages with open banking suppliers

The Government Digital Service (GDS) has published a request-for-information (RFI) from payment service providers as it engages with suppliers about potentially procuring open banking technology – a move illustrating the UK government’s growing appetite to embed fintech solutions into its operations.

GDS wants to ‘understand the market and service offerings for processing credit and debit card payments and pay by bank (open banking) payments’, according to a ‘prior information notice’ for a payment provider for Gov.UK Pay that will set open banking suppliers’ hearts pounding.

Gov.UK Pay is a digital payments platform that allows public sector services to take payments. Used by more than 1,100 services in 415 organisations, it has processed 90.1 million payments with a combined value of £5.7 billion (about $7.6bn) since 2016.

The RFI is published just over a year after Amanda Dahl, GDS’s deputy director of digital service platforms, mentioned its planned exploration of open banking technology in a blog-post. Writing in August 2023 (‘How common platforms deliver brilliant digital services’), Dahl stated that ‘later this year we’ll be investigating how Gov.UK Pay might offer open banking, which means that people will have the option to pay for services conveniently using their own banking app.’

Turnaround times for the RFI, which was published this week (18 September), are relatively tight: respondents have until the end of 23 September to ask ‘clarification questions’; GDS has a deadline of end-25 September to respond to them; and the deadline for overall responses is 2 October.

OPEN BANKING: EXPLAINED Open banking, and its sibling concept open finance, are being encouraged by governments worldwide, in different ways and at different speeds, as a means of boosting innovation and competition in financial services. It is a reference to users sharing their data with third-parties (for example, fintech companies). ‘Open’ refers to open application programming interfaces (APIs): software intermediaries that allow two machines to interact. ‘Open APIs’ are APIs made publicly available to software developers. Global Government Fintech’s focus is on its potential to improve public service delivery.

GDS and Gov.UK Pay’s roles

GDS has recently been moved from the Cabinet Office to the Department for Science, Innovation and Technology (DSIT) as part of structural changes after the election of the new Labour government in July.

Along with GDS, the Central Digital and Data Office (CDDO) and Incubator for AI (i.AI) were also transferred to DSIT as the new administration looks to ‘drive forward the digital changes needed to overhaul the British public’s experience of interacting with the government.’

Gov.UK Pay, which was introduced in 2015, takes payments and processes them using a payment service provider (PSP): either Gov.UK’s PSP, which is a company called Stripe, or Government Banking’s PSP, which is a company called Worldpay. Government Banking is a shared government function.

In last year’s blog-post, Dahl stated that Gov.UK Pay had onboarded 163 services in the previous 12 months, including the Forestry Commission and NHS Business Services Authority, ‘enabling them to take payments through online digital services’. Gov.UK Pay also launched a new Recurring Card Payments function – initially with Kent County Council ‘and with more public services to follow’ – which enables local residents to save their payment details for use in ongoing regular payments, Dahl wrote.

According to the latest Gov.UK Pay live performance data (today – 21 September), almost half (513) of its current service users are in local government, with the others being: central government, including devolved administrations, arms-length bodies and executive agencies’ (274); police forces (190); NHS trusts (99); and ‘central’ NHS (37).

RELATED ARTICLE UK digital functions rewired with pledge to ‘overhaul the experience of interacting with the government’ – a news article (10 July 2024) from our sister title Global Government Forum on Whitehall structural changes including GDS’s move into DSIT

‘Potential future procurement’

The RFI states that GDS has ‘seen 8.5 per cent growth in payments compared to the previous year and expect[s payment volumes] to continue to grow’. It adds that ‘this contract is for a subset of those services and payments.’

‘The payments are taken by the service integrating with a Gov.UK Pay-provided API [application programming interface], or creating a standalone hosted payment link using the Gov.UK Pay web interface,’ the RFI explains.

‘Responses to this RFI will inform a potential future procurement for a payment service provider to underpin the Gov.UK Pay platform, specifically for processing credit and debit card payments and pay by bank (open banking) payments made by end users to services operated by local government, police, the armed forces and some other public sector organisations,’ the RFI states.

Those responding to the RFI need to let GDS know whether they are interested in fulfilling credit- and debit-card payments only as a PSP; open banking payments only, as what is known as a Payment Initiation Service Provider (PISP); or go the whole hog of providing credit- and debit-card and open banking payments.

The RFI aims to help GDS refine requirements ‘as a precursor to procurement of a two-year contract with a payment service provider (PSP) and/or an open banking payment initiation service provider (PISP)’, it states, adding that GDS ‘reserves the right not to proceed with a procurement.’

RELATED ARTICLE UK Government Digital Service to explore adding open banking to Gov.UK Pay – a news story last year (14 August 2023) based on blog-post describing GDS’s open banking interest

Momentum beyond HMRC

Widely seen as global leader in developing an open banking ecosystem in the private sector, spurred by the creation of its Open Banking Implementation Entity (OBIE) in 2016, the UK has been blazing a trail in terms of public-sector interest.

The public sector’s first mover was HM Revenue & Customs (HMRC), which procured a fintech solution through a company called Ecospend to enable the department to receive payments via open banking in March 2021 – a government use case for open banking that has apparently made the department a global pioneer.

HMRC’s initial tie-up with Ecospend was awarded on a ‘two years with one-year extension’ basis, running to 29 February 2024. A new procurement process took place earlier this year, with Ecospend emerging triumphant in the process. The fintech company – which has been owned by Sweden-headquartered Trustly since January 2023 – said that its new contract award would allow both HMRC and Ecospend ‘to continue to drive the open banking agenda in the UK, bringing value for money and efficiencies to taxpayers.’ 

Last year state-owned savings bank NS&I (National Savings & Investments) also hired Ecospend to enable the use of open banking technology to enable people to make payments; and, last month, Global Government Fintech reported that the Department for Work & Pensions (DWP) had engaged Ecospend to develop a ‘UC open banking proof-of-concept’ (where ‘UC’ stands for ‘Universal Credit’ – a government benefit).

DWP’s toe-dip into open banking is focused on what are known as ‘Account Information Services – AIS’. DWP’s proof-of-concept ‘will be underpinned by Ecospend’s Datalink solution’, according to a 64-page contractual document, which describes Datalink as a ‘configurable white-label AIS product designed to facilitate the secure sharing of financial data’. The Datalink solution ‘will allow DWP’s customers to give consent to Ecospend to access and share their bank account information and financial transaction data with DWP for the purpose of supporting their applications for Universal Credit (UC) whilst enhancing user experience,’ according to the document.

RELATED ARTICLE Payment principals: public sector leaders map out financial innovation agenda – write-up of a session on  ‘Public sector financial innovation through payments technology’ at the Global Government Fintech Lab 2024 (25 April): CCS’s Lee Edmonds was one of the speakers

‘Very welcome’ direction

In further developments encouraging the use of open banking in the public sector, an ‘Open Banking (Data, Digital Payments & Confirmation of Payee Services) Dynamic Purchasing System (DPS)’ was set up at the start of the year by the Crown Commercial Service (CCS) – an executive agency of the Cabinet Office – with the ultimate aim of ‘reducing the costs of receiving money into public sector organisations, as well as reducing fraud’. HMRC’s recent renewal of vows (new contract award) with Ecospend was run through the DPS.

At an individual government agency level, the Driver and Vehicle Licensing Agency (DVLA) is also in internal discussions about the possibilities of using open banking technology.

The trade association for the UK fintech sector, Innovate Finance, included ‘promoting public sector adoption of open banking’ among its recommendations in a ‘FinTech Plan for Government’ published in July in the wake of the general election, specifically mentioning GDS and DVLA.  

‘Work by the Government Digital Service to extend Open Banking payments, successfully introduced by HMRC, to other government services is very welcome and a great way of developing consumer familiarity and trust,’ Innovate Finance’s 40-page document stated. ‘The government should set out a clear and ambitious plan for extending Open Banking payments to other government services and the wider public sector – such as the Driver and Vehicle Licensing Agency, Passport Office and local authorities,’ the trade body urged.

Speaking at an event in London in July, Innovate Finance’s chief strategy officer Adam Jackson – in answer to a Global Government Fintech question about the potential take-up across government of open banking technology – highlighted that “extending the HMRC solution [use of open banking] to all of the other things that we pay government and local government for” was particularly pertinent for a new government seeking to deliver “better public services” but without “money to throw” at the challenge.

FURTHER READING

Global Government Fintech’s Open Banking and Open Finance topic section