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.