UK's Most Impactful Open Banking Use Case — A transformative change to paying taxes with HMRC
As Australia develops its own unique use cases with CDR, here is more details about UK’s unique use case.
An article by Helen Child, Founder and CEO of Open Banking Excellence (OBE)
Location, location, location! The well-known phrase, emphasises the importance of getting the fundamentals in place when building or buying a house.
I’ve learned that thriving open banking & finance ecosystems are built on the foundations of use case, use case, use case! It all starts with the use case and comes back to the use case. It’s your North Star.
Open Banking Excellence (OBE) has a solid, track record of successfully assisting financial regulators across developed and emerging markets around the world. We advise regulators, banks and boards globally.
It’s sadly surprising how frequently we see intellectually impressive technical and regulatory infrastructures in place that have yet to meet the initial forecast market capacity. Put simply the volumes aren’t there yet.
A use case strategy puts the ‘P’ into your P&L!
Regulatory frameworks and commercial strategies that are informed from the outset by use cases thrive. It’s become self-perpetuation creating energy into a flourishing ecosystem. The market powers innovation and changes the dial for a country's citizens and economy, making a fairer more inclusive society. One that transitions into a digital economy.
The Global Open Finance Index, delivered in collaboration with Oxford University, The World Bank and The UK Government, shows that use cases diverge by geography and market maturity. Open banking was born in the UK. So, let’s take a look at the best use case we have…
I’m privileged to advise HMRC (His Majesty’s Customs and Excise), the UK tax collection agency on their future strategy for open banking. I work alongside an incredible team that has built the world’s best use case. I’m delighted to have the opportunity to shine a light on their work, share what they did, why they did it and what’s next. In doing so to inspire other Governments to look at the opportunities created by the largest and most successful open banking use case globally.
Setting the Scene
In March 2021, when the service launched, HMRC was the first public body in the UK to adopt open banking as a payment method. They were also the first tax authority in the world to do so!
And they made the UK the first government in the world to mainstream open banking in its operations. To begin with, the service was offered for Self-Assessment Tax, which was extended rapidly to Corporation Tax and Employers’ PAYE, and has since been introduced to a total of 43+ tax and duty types. Just amazing!
Why Paying your Tax by Open Banking Makes Sense
We love a backstory at OBE, so let’s hear from Nick Down, Head of Payments, HMRC, as to what was behind this ambitious move.
You can read more from Nick in Chapter 6 of The Global Open Finance Index.
And you can hear from him here on OBE’s YouTube channel.
Now 100% of customer can now pay by open banking.
It’s already the 3rd most popular way for individuals and businesses to pay their taxes, coming behind other bank transfers and direct debit, but ahead of cards, CHAPS and BACS.
Its popularity is growing fast.
In the first weeks of January, leading up to the big 31 January 2024 deadline for Self-Assessment, over 1 million tax payments with a combined value of £3.5Bn were made by open banking – up by 16% and 35% respectively on 2023, continuing the rapid growth seen since Day 1.
To help picture the scale, we looked to equate the tax collected by open banking to the GDP of a country. At one stage it was more than Papua New Guinea – we now need somewhere bigger!
Community Consolation and Collaboration
HMRC have another ambition, which we believe will be game changing, generating a massive step change in the volume of transactions in the ecosystem.
OBE has convened our community to take part in a huge listening exercise around HMRC’s ambition to launch APIs which allow 3rd party platforms to log in to key tax services on behalf of their clients.
Embedding HMRC’s own API in to third party platforms
As you’d expect, at the end of every journey there is a tax collection payment. So just take a moment to imagine the innovation this enables for both banks and fintechs, and the collaboration for enhanced services this will drive. Game- changing and at a time when the industry is ready for it.
The innovators at HRMC wanted to know whether there was the commercial appetite to support widespread adoption of its new APIs. They were also keen to gather feedback on the design and scope of the APIs, as well as ideas on the potential future opportunities and innovations open banking can unlock. These include the ability to view account balances, to see - and therefore plan for - known future liabilities, and to claim repayment of credit balances. Their goal is to make it easier for taxpayers to understand their tax obligations. And better able to plan, prepare for and then discharge them. HMRC asked the OBE community if it was heading in the right direction.
We had an incredible response to this important listening exercise, with our community rallying to generously share their time and provide expert insights and guidance.
All I can say is watch this space for more trail-blazing news from the pioneers at HMRC.
Fittingly the final word should go to the users. These unsolicited comments speak volumes…
Thank you for providing me with the platform to fly the flag for the UK and share a little of the transformational work delivered by the HMRC Team. What they have quietly achieved, I think you’ll agree, is truly remarkable.
Who would have thought that the way we pay our taxes could be game-changing?!
I can’t wait to see you later in the year. Wishing you all a very successful conference.
Best wishes,
Helen Child
Founder and CEO Open Banking Excellence (OBE)
