Easy and frictionless online payment tools have long been a priority for financial institutions in the UK. With open banking systems helping an ever-growing number of businesses and clients, the public sector is also ramping up its usage of the technology.
London-based bank payment company GoCardless announced in March its inclusion in the Crown Commercial Service’s list of financial firms named as suppliers of its Open Banking Dynamic Purchasing System framework, which includes firms like NatWest and software company Moneyhub.
The framework, launched on December 8 2023, allows payment companies to extend their open banking services to institutions within the public sector, including government bodies, educational institutions and charities.
Historically, the primary beneficiary of open banking systems has been the private sector, with more than 750mn small and medium-sized businesses in the UK using open banking products as of 2023. Meanwhile, data security concerns have prevented many representatives from the public sector from using the technology.
“Open banking is a relatively new market that has not yet had the chance to realise its potential in the public sector fully,” says a CCS spokesperson. “However, we believe that its use would bring a more accurate understanding of personal financial circumstances and allow vulnerable members of society to receive vital payments quicker.”
With the Dynamic Purchasing System framework, the government is looking to create safer environments for institutions like local councils, universities, social services providers and charities to use open banking tools by filtering suitable suppliers that have gone through pre-arranged checks.
According to the CCS, the framework is designed to reduce the costs of receiving money for public sector organisations by up to 80 per cent and reduce fraud across the sector by ensuring that all suppliers and third-party providers are authorised by the Financial Conduct Authority.
Furthermore, commercial agreements stipulated under the framework are not mandatory, meaning that public customers are able to opt out of services and choose different routes and providers based on their needs. However, entry requirements for firms are demanding.
“The most exciting thing for us is that the framework will allow us to learn a lot as we go through the process and will open huge opportunities for our firm, but it will also allow us to tap into our market expertise and use it to engage with public sector bodies,” says Pat Phelan, managing director of UK and Ireland and chief customer officer at GoCardless.
Under the DPS, payment service providers can help clients access secure digital payment channels while preventing fraudulent activities through data verification and protection tools.
“We really had to prove our trustworthiness and what we said that we could do, and a core part of the process was to bring all that we have achieved over the past couple of years and present it to the CCS,” says Phelan. He adds that the firm had to provide its position within the open banking directory and stamp of approval from the FCA.
Phelan says that credibility and understanding of the business environment are key for a company looking to enter the framework, because the core differences between serving private and public entities lie within the specific needs of each group. “From our perspective, it is important to acknowledge the opportunities and constraints of the public sector and learn to work within them,” he says.
