In 2019, we launched a new Scottish Government funded pilot project which provides a digital gateway into debt advice.  

The rationale behind the project is clear: advice services in Scotland are stretched to breaking point – can we alleviate some of that pressure by carrying out some of the early information gathering phases of client contact?

Digital pilot overview 

Our digital project has four simple actions that clients are directed to after contacting us via our webchat button.

That is not to say that advice is simple – it is increasingly complex as advisers deal with the repercussions of a decade of welfare reform, stagnating incomes, and rising personal debt levels among households on the lowest incomes. Our project focuses on the early information gathering phases, however, and this initial point of contact should be simple.

The Scottish Government’s new workforce strategy will underline the importance of maximising adviser time to focus on clients. Part of this will be achieved by removing some of the arduous reporting requirements which mean advisers can spend more time toiling through admin tasks than providing advice. However, digital innovation offers a new opportunity to help advisers focus more time with clients.

Using open banking 

Back in May 2019, FinTech Scotland published a call for collaboration with the aim of advancing new digital solutions for the advice sector. A number of fintechs got in touch with different versions of products that use open banking technology. Currently, we are delighted to be using Castlight’s Affordability Passport to both capture income and expenditure (I&E) and provide a statement of all consumer credit debts. Moreover, it does so rapidly – using open banking this process takes 5–10 minutes rather than the weeks and months it can sometimes take to obtain this information across multiple advice appointments.

Collating client I&E and identifying debt levels is one of the central pillars in the advice process. It’s also time consuming, and much of it can be guesswork. Using open banking gathers this data rapidly while also increasing the quality of the information.

Members of the public are already accessing this resource via our webchat project. Over the coming weeks, we are working with some member organisations to allow them access to this open banking resource.

What open banking can do (and what it shouldn't)

Two thirds of people in the UK have never heard of open banking. When levels of public awareness are so low, it is natural that myth and misconception can take hold.

Many people are talking about open banking as an abstract concept without having that practical experience. In that sense, it is worth sharing some early learning from our own experience, and while we’ve already given a brief outline about what open banking can do, it is equally important to flag what it cannot and should not do.

It's not about taking the adviser out of the process 

We’ve heard people talk about how open banking apps can be used to pre-populate a financial statement, calculate disposable income, and within minutes a client is presented with a repayment arrangement.  In our view, that’s a non-starter.

The set of circumstances leading up to a person reaching out for advice – where someone will be cutting back on essential expenditure to meet debt obligations – is not the stable set of circumstances upon which to set up a plan going forward. We know that people spend months and often years living in the sweatbox before they reach out for help.

At its essence, debt advice is about bringing stability to volatility; this won’t be achieved through that approach.  Once data is gathered and categorised, we still need a skilled adviser to interpret that information and compile a realistic and sustainable budget. 

Our use of open banking aims to empower the adviser by providing an enhanced picture of someone’s circumstances, rather than removing advisers from the process altogether. New research which we will publish shortly will reiterate the importance of retaining and increasing the availability of face-to-face advice.

It's not about uncovering 'hidden' expenditure or judging clients 

This absolute view of financial transactional data is arguably unprecedented. With that in mind, it is crucial that we approach this with caution, and avoid judging clients.

Indeed, the first thing anyone advocating open banking for a client should do is to trial it on their own accounts. I did just that, and for my own report there were close to 1,000 different transactions over the past 12 months. Needless to say, I don’t always make wise spending decisions.

People using this data to help clients should first set aside any internal biases and prejudices about how others might be spending money. One of the fundamental principles of being a money adviser is to avoid being judgemental. We all make mistakes with our finances – but if you’re on a low income, or if you’re vulnerable, you pay a far heavier price.

It's not going to avoid the need to properly fund the advice sector 

It should be clear that open banking won’t remove the need to properly fund the free advice sector. This type of innovation should bring speed, accuracy and precision to an important part of the advice process. It should also allow more time for advisers to focus on the specialist part of the advice process.

But when nearly 70,000 people in Scotland need but aren’t getting debt advice, we need to recognise that while technology has a part to play in reducing that gap, it is not a silver bullet.