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Open Banking

How does Open Banking work?

How does Open Banking work?
Photo by Vinicius Wiesehofer

Open Banking is a secure way to give Third Party Providers access to your financial information.

You will need to provide your consent to use a third-party service that uses Open Banking. This process is relatively straight forward.

Mobile Banking Consent

To provide Mobile Banking consent you will:

  1. select your bank.
  2. then be redirected to your Mobile Banking application.
  3. login using your usual authentication method – E.g. FaceId or PIN.
  4. authorise consent for the action.
  5. then be redirected back to the third-party website of mobile application.

Online Banking Consent

To provide Online Banking consent you will:

  1. select your bank.
  2. then be redirected to your Online Banking website.
  3. login using your usual login details and any 2FA credentials.
  4. authorise consent for the action.
  5. then be redirected back to the third-party website of mobile application.

You will likely need your card reader to approve payment requests using Online Banking.

Removing Consent

Under current Open Banking rules:

  1. You will need to renew consent at least every 90 days.
  2. You should be able to easily revoke access using the third-party.

Note: You must NEVER enter your credentials into a website or mobile app that is not provided by your bank.

Next: See HSBC Consent Example

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HSBC Open Banking payment example

Please see below for an example payment checkout experience. This is for a Paydog request paid using the HSBC mobile app.

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Open Banking

When did Open Banking start?

When did Open Banking start?
Photo by Anastasiia Tarasova

Open Banking and PSD2

Open Banking as a legal requirement came into force on 13 January 2018. But Open Banking started as a result EU Payment Service Directive 2.

On 8 October 2015, the European Parliament adopted the European Commission proposal to create safer and more innovative European payments (PSD2, Directive (EU) 2015/2366)

EU Directives must be transposed into national law within 18 months. As a result, the UK transposed PSD2 into UK law under the Payment Service Regulations 2017.

Strong Customer Authentication

At the time the EU could not agree all parts of PSD2. Only in 2017 did the EU agree the Regulatory Technical Standards.

More info

Payment Service Regulations 2017: https://www.legislation.gov.uk/uksi/2017/752/contents/made

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Open Banking

Can I use Open Banking APIs?

Can I use Open Banking APIs?
Photo by: averie woodard 

Despite it’s name, Open Banking is not directly, instantly available to everyone. Adding protection to consumers was one of the driving factors for its inception. It does however provide a framework for innovation and for individuals and small businesses to take advantage of APIs.

To use Open Banking APIs you either need to be a regulated Third Party Provider or use the services of an already authorised Third Party Provider.

For more information see How does my company become a AISP or PISP?

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Hawala

Hawala is a traditional system of transferring money used in Arab countries and South Asia, whereby the money is paid to an agent who then instructs an associate in the relevant country or area to pay the final recipient.

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Payments

Do standing orders go out on a Saturday?

UK Standing Order Payments don’t go out on Saturdays. Photo by: Sincerely Media

Standing Order Payments in the UK do not go out on a Saturday, Sunday or Bank Holiday.

For more details see Payments on the Weekend.

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Payments

UK Bank Holidays

Most of the UK has eight permanent bank holidays. Photo by Estée Janssens.

Most of the UK has eight permanent bank holidays per year: New Year’s Day, Good Friday, Easter Monday, May Day, Spring Bank Holiday, Late Summer, Christmas Day and Boxing Day.

However, Scotland also has 2 additional Bank Holidays : St. Andrew’s Day on and 2 January.

Northern Ireland has two extra public holidays : St. Patrick’s Day on and the Anniversary of the Battle of the Boyne.

To mark the Queen’s Platinum Jubilee there will also be an additional bank Holiday on June 3rd 2022.

England and Wales bank holidays

2021DayLikely dates , but could still change.
31 MayMondaySpring bank holiday
30 AugustMondaySummer bank holiday
27 DecemberMondayChristmas Day (substitute day)
28 DecemberTuesdayBoxing Day (substitute day)
2021DayLikely dates , but could still change.
3 JanuaryMondayNew Year’s Day (substitute day)
15 AprilFridayGood Friday
18 AprilMondayEaster Monday
2 MayMondayEarly May bank holiday
2 JuneThursdaySpring bank holiday
3 JuneFridayPlatinum Jubilee bank holiday
29 AugustMondaySummer bank holiday
26 DecemberMondayBoxing Day
27 DecemberTuesdayChristmas Day (substitute day)

Scotland bank holidays

2021DayLikely dates , but could still change.
3 MayMondayEarly May bank holiday
31 MayMondaySpring bank holiday
2 AugustMondaySummer bank holiday
30 NovemberTuesdaySt Andrew’s Day
27 DecemberMondayChristmas Day (substitute day)
28 DecemberTuesdayBoxing Day (substitute day)
2022DayLikely dates , but could still change.
3 JanuaryMondayNew Year’s Day (substitute day)
4 JanuaryTuesday2 January (substitute day)
15 AprilFridayGood Friday
2 MayMondayEarly May bank holiday
2 JuneThursdaySpring bank holiday
3 JuneFridayPlatinum Jubilee bank holiday
1 AugustMondaySummer bank holiday
30 NovemberWednesdaySt Andrew’s Day
26 DecemberMondayBoxing Day
27 DecemberTuesdayChristmas Day (substitute day)

More : For more information see UK Govt Bank Holidays

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Payments

Can payments go on a weekend or bank holiday?

Payments on weekends and bank holidays depend on which Payment Scheme your bank or senders bank uses. Photo by Estée Janssens.

Most of the UK has eight permanent bank holidays per year: New Year’s Day, Good Friday, Easter Monday, May Day, Spring Bank Holiday, Late Summer, Christmas Day and Boxing Day.

Faster Payments

Payments using Faster Payments can be made and typically clear in about 10 seconds. The can be made on all weekends and bank holidays. These are typically one-off payments made when you use online or mobile banking.

Standing Orders

Although Standing Orders are often sent via the Faster Payments scheme, they still operate only on weekdays. Standing Orders falling on a weekend or bank holiday will be sent on the next working day.

Direct Debits and Credits

Direct Debit and Credits are processed by most banks using BACS.

Since BACS only run on business working days, this can affect the payment dates. BACS usually takes 2 business days to complete, so if a payment is due to go out on a Saturday, it will instead be made on the Monday.

For credits to you account such as payroll, most providers will adjust the submission date so that you get your payment early.

Direct Debits and Credits on Bank Holidays

BACS is also unavailable on bank holidays so payment dates can also be delayed.

E.g. Monday 31 May 2021 is a bank holiday in the UK, which means that the process for debiting/crediting payments due on the following Tuesday and Wednesday in both cases will need to start a day earlier than normal. 

For example, if any Direct Debit or Direct Credit payments are to be debited / credited on Tuesday 1 or Wednesday 2 June 2021, then the latest submission dates are Thursday 27 and Friday 28 May 2021, respectively. 

Next : See full BACS Calendar or more about UK Payment Schemes.

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Payments

Why can’t I reserve money on a bank account?

I am often asked “can you put a hold or reserve money on a Bank Account”. The purpose being that the merchant then wishes to decide to bill the user at a later point and wants guaranteed payment. I.e. to know that these payment will clear if requested in the future.

This sounds an easy task and something that all Banks and debit cards should be able to offer. After all credit card companies offer this service.

The reason for this not being possible is not a technical one but a legal one and more importantly a fundamental definition of what a Bank Account actually is.

If you think about what a Bank Account is and is legally defined as, it’s actually a record of what a Bank owes you. It’s actually a contract to state that it will return this money to you.

A Bank Account is a record of what a Bank owes you.

So the problem with reserving funds comes when you try to state how much money do they actually owe you. For example if the Bank owes you £10,000 and but let’s say we want to reserve £2,000, how much does the bank actually owe you?

You might instinctively say well the bank owes you £8,000 as I have £10,000 but £2,000 of this is reserved. But hold on, either I have £10,000 or I have £8,000 which is it? Make up your mind. If I have only £8,000 then my balance is £8,000 and not £10,000 so it is effectively transferred already. Which it legally has been if this is reserved by someone else.

So in summary reserving ownership of funds is actually the same as transferring the ownership of funds since this is all money the Bank owe you. Legally a Bank Account is a record of an obligation of how much money they pay you.

This is the reason you cannot reserve funds for later payment or billing.

The solution for merchants who wish to make sure they will get payment to this is use an Escrow service.

Photo by: Will Porada

Categories
Payments

The 6 UK Payment Schemes

Want to know the difference between CHAPs and Bacs?
How much can I transfer using Faster Payments?
How long does a cheque take to clear?
What is the Link Scheme?

For these and more questions answered see details of the 6 UK Payment schemes