Can technology help the crucial impartial debt advice sector?

Photo by Alice Pasqual on Unsplash

The first blog in a series connected to FinTech Scotland’s consumer inclusion work. Nicola Anderson shares her reflections on work we’ve been doing with the impartial and independent debt advice sector. There is no doubt technology and fintech can play a role in the future of this crucial sector and we’re keen to support more collaboration and finding ways to build needed solutions.

Recent research and studies have found that 51% of consumers run out of money before payday; 23% report they are finding it difficult to manage; one in five consumers have no savings and almost 16% of the population can be described as over-indebted.

Recognising demand for debt advice services is rising, we invited representatives from a range of debt advice agencies and Scottish Government to discuss the current problems facing the sector and the potential for seeking technology-based solutions to practically improve the experience for those both providing and receiving debt advice.

Working collaboratively and across sectors the aim of the initiative was to identify priority issues that, if addressed through technological developments, would benefit the debt advice sector, building efficiencies and putting users at its heart.

The input from these experts has shaped three main problems and we’re pleased to share details of these in this blog. Of course, the next stage is to find solutions for these issues! Ever the optimist I’m hopeful that collectively we can do that, starting with sharing what this vital sector thinks its main problem are!

Unanimously, the experts agreed that the problem top of their list was the sectors limited ability to access available data efficiently or to its fullest extent. They shared examples where it can often take weeks to have a fully verified understanding of a clients circumstances, due to time consuming nature of the range of data and documentation checks needed to verify the position. Understandably this can exasperate the stress for people but in addition there can be circumstances where it also can limit the appropriate options for debt advice solutions.

Second problem held by the experts in the room was that current debt solutions and repayment plans are inflexible and do not reflect the reality of people’s lives – which exacerbates problem debt. Current solutions, more often than not, seem to force people into a set date repayment plan with little of no flexibility to reflect the fact that income could be variable or paid at different points each month. The view in the room was that there seemed to be little room for flexibility once a plan was in place and there was a general desire to see all creditors think about the benefits of greater flexibility in repayment plans not just when someone enters a problem debt scenario.

The third problem centered on the lack of pre-emptive engagement options to enable earlier intervention in a developing debt scenario. Experience shows that general recognition of the tipping point’ into problem debt is poor, increasing in the numbers of people moving from debt to problem’ debt scenarios. The inability to recognise the tipping point’ happens across a range of vested stakeholders including, Consumers/Citizens, Financial Organisations and Statutory bodies.

Money Advice Scotland in particular, are hopeful that technology solutions plays a key role in the debt advice sector of the future and have plans to work with FinTech Scotland and the fintech community to help develop and raise further awareness on financial inclusion issues impacting today’s society.

The insights coming directly from the experts who work with people at the heart of this issue are invaluable. Are there any quick wins available to any of these issues ”“ we’d love to know!

In the meantime, thank you to all those who shared their views, its good to know the debt advice sector will continue the focus on this initiative.

FCA news – Tips to keep up to date with the regulator

I always pause for thought as I write an update on what’s happening at the FCA, thinking about how to summarise the essence of what I’ll cover and knowing I’m only focusing on a small sample of what’s going on there.

For those of you able to make it to last week’s FCA event you’ll have heard the team talk about the size of the FCA’s role and remit. Since coming back to work after the Christmas break I’ve found myself thinking about what to cover in my regular blogs, when there could be so much to highlight. So its with that thought in mind that I’m focusing the majority of my update on a couple of ways to keep up to date with what’s going on at the FCA and ending with a specific point relating to a consultation paper on cryptoassests.

Getting updates from the FCA

There are two communications that I’ve always found helpful and even more so since staring my role at FinTech Scotland.

The first is simply a weekly email that contains a summary of that weeks FCA news. Its a great way of seeing what the Regulator has published that week. It’s no more than one page (usually) and will include links to any consultation papers, policy papers, final notices, speeches etc. Its worth signing up for – try this link.

The second is the Regulation Round Up. Its published on a monthly basis, includes information that is relevant for all firms regardless of sector, size or business model. The January Edition can be accessed here and for those interested you can also sign up to receive the Regulation Round each month – regardless of whether or not you’re involved in an authorised or regulated business. Again – my view is – its worth signing up for!

As well as covering hot topics, the Regulation Round Up provides updates on ongoing FCA work, will often contain articles outlining the FCA’s view on an topic and will include relevant links to current consultations and other FCA papers that may be relevant to your business or future plans. It will also outline any FCA events that maybe relevant or useful for your business.

The January edition highlights that the FCA intends to carry out a survey of smaller firms on how FCA regulation specifically impacts them. This work will be completed by an independent consultancy – Kantar Public. If you’re contacted please support this initiative. Your feedback will be highly valuable.

It also mentions that the FCA will be holding two events in Edinburgh in March aimed at regulated firms working in general insurance or the retail investment market. You’ll find more detail through the January Edition link above as well as information on how to register for the events.

There is much more information in the round up and the final point I’ll reflect on here is that in this months edition it also covers the important topic of Preparing for Brexit!

Getting insight from the FCA

To help focus its work, the FCA has divided the financial system into seven sectors that it monitors on a continual basis. It develops a set of sector views that provide a way to bring its collective intelligence together and considers a wide range of factors that drive change across the financial system.

The sector views are published and made available on the FCA website and will also be used as the FCA shapes and develops its business plan – due later this year.

The latest set of sector views were published in January and can be accessed here

Consultation paper – Guidance on Cryptoassets

The FCA is consulting on Guidance on crypto assets. This work is to help businesses understand whether their crypto asset activities fall under regulation.

This consultation has the potential to apply to a wide range of businesses. If crypto assets is currently or may potentially to be part of your business in the future, or if you’re engaging or talking to consumers on this topic or marketing this type of product, please review this consultation and offer your feedback. Comments are required by Friday 5th of April and can be emailed to fcacrypto@fca.org.uk

As I sign out for now, a final reminder that the FCA’s project Innovate team is hosting an event in Edinburgh on the 31st of January. I look forward to seeing you there. Please come and say hello especially if we’ve not met yet.

All the best

Nicola

Latest news from the FCA

Happy New Year!

I often wondered at what point in January we should stop saying this – but the potential for 2019 is still fresh and the positive ambition continually demonstrated across the Fintech community in Scotland continues to be remarkable and worth all good wishes!

The end of 2018 was jammed packed and not just with festivities! The FCA published a number of documents just before Christmas that are worth drawing attention to and may be relevant to many of the firms in the FinTech Scotland community. The types of work below include: an analysis of a sector, a consultation paper and a speech. It highlights the variety of tools and approaches the FCA use to understand what’s happening in the market, to share its view and to set out its expectations.

Analysis of a Sector

The Strategic Review of Retail Banking Business Models will be of interest to many businesses (perhaps not the snappiest of titles – but an enlightening read). Retail Banks and Payments firms will have a natural interest, in addition anyone considering business model development associated with Open Banking changes may find the report a useful read and more specifically anyone developing a business model focused on SME banking may find the report useful.

The work is one of the FCA’s business plan commitments for both 2017 and 2018. The purpose of the review was to understand the impact of accelerating change (from regulatory changes and technological developments) on retail banking business models and the potential implications for consumers.

I think the findings are thought provoking – chapter 4 in particular provides food for thought. In its conclusions the FCA sets out areas for further work. It also notes topics where work in collaboration with other regulators and interested groups may be of interest to the consumer – specifically access to banking services, systems resilience and appropriate use of consumer data.

The FCA are interested in feedback and industry engagement on this work. Feedback can be given using StrategicReviewofRetailBanking@fca.org.uk by 15th of February.

Consultation Paper

Overdrafts consultation paper – High Cost Credit Review sets out a raft of proposals to reform charges related to overdrafts. The proposals aim to address a number of issues that are considered as drivers of harm to consumers. These include complexity of overdraft pricing, high levels fees and repeat use.

This paper will be of interest to firms currently offering overdrafts. There are also parts of the paper relevant to some payments providers (depending on the business offering) and businesses offering products that have a similar function as an overdraft. Consultation closes on 18 March 2019.

Speech

To finish this update I thought it may be of interest to share this Speech – Diversity and Inclusion. Speeches such as this are helpful for the FCA to share its expectations and are useful for all firms to see, especially those that are newly authorised or firms that don’t have much day to day engagement with the FCA.

Beyond the important topic of Diversity and Inclusion (D&I), this speech also confirms the FCA’s continued focus on Culture as part of its supervisory approach and it’s relevance for all authorised and regulated firms regardless of size. Culture can be a subject that’s difficult to judge or assess. In this speech Chris Woolard links the importance of D&I in understanding culture and he affirms the FCA’s view on the importance of fair treatment of consumers and in particular vulnerable customers. He talks about the role of senior management within firms and shares some insights from the whistleblowing disclosures the FCA received. He sets out that authorised firms can expect the FCA to talk to them about D&I practices and vulnerable consumer policies, amongst other things!

Finally, as a reminder we’re running two FCA events in January. The first is on 16th and is focused on building an understanding of the FCA. Its aimed at firms new to authorisation or those thinking about becoming authorised. The second is on 31st and is being lead by the FCA’s project innovate team.

I look forward to seeing you then.

All the best

Nicola

Helping build a broader understanding of the FCA across the Fintech community

Starting with a morning event on the 16th of January and working with the FCA team in Edinburgh. The session will explain the FCA’s approach to regulation with the team outlining the way the FCA works and share current priorities.

If you’re a Scottish fintech sign up here to register your interest for that event.

The saying goes time flies when your having fun. Since joining FinTech Scotland I’ve come to fully realise the absolute truth behind that expression. I can’t believe it’s been 9 weeks since I joined the team. It’s been a whirlwind of meet ups, introductions, meetings and discussions. On top of a few pre-Christmas get togethers and events!

I want to say a huge thank you for the support and collaboration you’ve shown me as I stepped into the wonderful world of FinTech Scotland. One thing is for sure – its a vibrant ecosystem that will continue to go from strength to strength because of the collaboration and drive of all involved and its a real privilege to be part of this.

The ambition across the community is immense. I think it ranges from driving efficiency, lowering costs and strengthening existing businesses through to more disruptive innovations seeking to build diversity, design unique products and drive consumer inclusion.

Whatever the ambition it’s likely there is a need to think about regulation – not perhaps the most exciting topic to raise in the run up to Christmas – but useful to note the event planned for January that aims to provide a solid insight into how the FCA operates.

The role of the regulator is broad and its worthwhile understanding its remit, how it works and how best to engage with, and navigate the organisation. The event on the 16th of January will help with this.

The FCA’s view on innovation is well documented. It is committed to supporting innovation in the interests of consumers. And the work the FCA does is focused on delivering better outcomes for the markets it regulates.

I look forward to working with you in 2019 and will welcome input and feedback on other subjects and topics that would be helpful to hear more about from a regulatory perspective. In the meantime I’ll look forward to seeing you on the 16th of January (if not before).

Wishing all a very FintechMas’ and Innovative New Year.

FCA consultations on Innovation PSD2

Article written by Nicola Anderson, Senior Manager Retail Banking Supervision at the FCA.
Nicola just joined FinTech Scotland on a 1 year secondment.

After a slightly delayed start I’m delighted to have arrived at Fintech Scotland and I’m looking forward to being part of the team there for the next year.

Thanks to Stephen, Mickael and Shery for making me feel so welcome and part of the team. I’ve been out and about most of the week, meeting stakeholders and learning about the work, the innovation, collaboration and general mood of optimism! I’m looking forward to more of the same over the coming weeks and hope to meet many of the Fintech businesses in the next few weeks.

One point of interest has come up this week that I wanted to mention. I’m sure you’re already aware that the FCA has published a couple of consultation papers relevant to Fintech, Innovation and PSD2. Both papers are still open for views or responses, and links to both are attached below. The FCA welcomes input and perspective from interested parties and in particular those with experience on the subject. Through gathering views, next steps and further direction can be shaped in an informed and useful way. You can feed back directly on some or all of the questions posed in each paper.

PSD 2 consultation paper – closes on 12th October. The paper is focuses on:

1. The Regulatory Technical Standards for strong customer authentication and common and secure open standards of communication (SCA-RTS).
2. Domestic implementation before the EBA exemption guidelines are finalised
3. New fraud reporting requirements that will affect the data collected and reported by all PSPs

In addition the FCA is taking the opportunity to update its Payment Services and E-Money Approach Document guidance to reflect other legislative changes and clarify existing expectations based on experience of the regime (eg, of processing applications) since September 2017. These proposed amendments and additions are in Annex 3 of this consultation paper

https://www.fca.org.uk/publications/consultation-papers/cp18-25-approach-final-regulatory-technical-standards-and-eba-guidelines-under-revised-payment

Global Financial Innovation Network (GFIN) – deadline for responses is 14 October.

https://www.fca.org.uk/publication/consultation/gfin-consultation-document.pdf

This consultation sets out three main functions of the GFIN:

1. Act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models:

2. Provide a forum for joint policy work and discussions; and

3. Provide firms with an environment in which to trial cross-boarder solutions.

As part of consultation the FCA is seeking views on the mission statement for GFIN, its proposed functions, and where it should prioritise activity.

Do contribute to both or one of the consultations if you can and think it’s relevant to your business.

Best

Nicola