Inside Hargreaves Lansdown's selection process for cardless transfers

George Rodgers, senior product manager at the investment firm, details the firm's selection and implementation process with Ecospend

by | July 5, 2022 | bobsguide

As open banking and third-party payments gain momentum, Hargreaves Lansdown has become one of several UK firms to opt for a banking as a service (BaaS) provider to lead its payment transformation.

HL’s most recent partnership with Ecospend has facilitated the UK asset manager to offer its clients the option to pay directly via their bank.

The team-up removes the need for customers to enter their card details when transferring money to their HL accounts, making transfers quicker and more secure. It’s the result of a three-month tender and selection process and part of a wider digital transformation at the asset management firm.

Why Ecospend was the right partner for Hargreaves Lansdown

According to George Rodgers, senior product manager at HL, the partnership fulfils the asset manager’s objective for better security, speed, and ease of payment to offer “the best payment experience to clients as possible.”

The option to pay directly via bank provides enhanced security against fraud risks than that of card payments.

“The benefit of moving to this open banking payment method is that the APIs are much more modern. They have been designed to reduce instances of fraud,” Rodgers told bobsguide.

To tackle fraud, secure customer authentication takes place as the payment is made.

Since most UK banks have already integrated with the Ecospend platform, they will authenticate the transactions at their end using varying authentication methods, including biometrics, fingerprint, face ID scanner, and QR code, among others.

The partnership provides HL’s customers with a new payment gateway in addition to the existing direct debit transfer and pay by card options.

The financial firm sees its latest partnership as an entry point into the growing open banking sector, which according to payment consultant, Penser, is expected to reach a market size of $395 billion by 2026 globally.

Although HL declined to give any specific figures around current usage, it anticipates open banking to become one of the most used payment methods for its clients.

Its anticipation for an influx of third-party payments also played a role in the selection of Ecospend. The asset manager was further assured of the UK fintech’s capability by its client roster, which includes several large UK financial institutions. More recently, the firm added the London Mutual Credit Union, technology provider Qualco and ITV to the roster of clients using its open banking infrastructure for payments.

In February last year, Ecospend secured a contract from Her majesty’s Revenue and Customs (HMRC), to provide open banking services to the UK tax authority to enable taxpayers to pay directly from their bank accounts.

By September that year, it was reported that HMRC had collected over £1 billion in tax via open banking technology.

Ecospend’s success with HMRC encouraged HL to integrate with the fintech, as the asset manager also expects to process billions of pounds in payments and was looking for a tech provider with a proven record of resilience.

Beyond a new payment method, HL will also benefit from an influx of data coming into its system, giving it the necessary tool for automation.

“It makes it much easier for us to automate more of our back-end processes because we have clean data coming in,” said Rodgers.

How Hargreaves Lansdown selected Ecospend

Hargreaves Lansdown began looking for an open banking service provider back in February, running a three-month tender process to select the most suitable partner.

Since HL only covers UK clients, it limited its search to UK service providers.

HL reviewed potential offers based on the security of the architecture, flexibility offered by APIs, ease of reconciliation for successful payments, speed of payment journey, and quality of incoming data.

After analysing proposals from 15 suppliers, the company opted for Ecospend, citing the fintech’s specialism and capability in open banking as one of the reasons for selection.

“[Ecospend] specialise in open banking. So, they have an explicit aim to develop APIs to interact with UK banks and open banking interfaces,” explained Rodgers.

“What they have built is really flexible. It lets us do exactly what we want.”

Ecospend’s open banking functionality also covered all of HL’s need, removing any requirement for the asset manager to build anything in-house to link with the two APIs.

Following the selection, HL integrated with Ecosystem’s ready-to-go API without friction and only writing a portion of new APIs for integration.

HL has initiated a phased roll out of the open banking service to a subset of users to test the impact on the payment success rate.

The company plans to have the service available to all customers by the end of the calendar year.

HL gets aggressive with digital strategy

HL’s partnership with Ecospend comes amid the asset manager’s ongoing digital transformation journey.

In December last year, the financial firm partnered with a digital due diligence platform, Door, to streamline its information gathering process.

Two months later HL announced plans to invest £175 million over the next five years to expand its digital capabilities to build new products and services.

HL followed the announcement by teaming up with US payments technology group Bottomline to utilise the latter’s cloud-based payments platform Bottomline PTX.

The Bottomline partnership expanded HL’s payment capabilities to include direct debit functionalities, adding to its payment by card feature via the Stripe platform.

In the future HL could look to leverage open banking beyond the payment method and payment initiation service it currently uses.

“There are other things around open banking such as account sharing and variable recurring payments where we see a use case for. When those technologies become more mature and widely adopted, we want to be able to get them in front of our clients as soon as possible.”

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