Home Fraud, Error and Debt UK government ups fintech focus in ‘debt resolution’ framework

UK government ups fintech focus in ‘debt resolution’ framework

Personal debt: creation of the 'Debt Resolution Services’ framework comes as the economic impact of Covid-19 takes its toll on many people's finances | Credit: Andrew Khoroshavin; Pixabay

The UK government’s procurement agency is looking to “bring fintech to the fore” as part of a newly created framework of ‘debt resolution’ providers.

The Crown Commercial Service (CCS) is in the throes of creating a commercial ‘Debt Resolution Services’ (DRS) supplier roster that all UK public sector bodies will be able to use to source specialist companies.

The CCS, which is an executive agency of the Cabinet Office, told Global Government Fintech that ‘two or three’ of the framework’s ‘lots’ (service types) – of which there will be 19 in total – will be of particular relevance to the fintech sector.

The CCS envisages greater use, through the new framework, of emerging fields such as open banking for authorities to obtain a ‘real-time’ view on people’s individual financial circumstances. This, it believes, will enable better spotting of potential financial vulnerabilities and help it take action, including more tailored communications, to prevent people getting into debt.

Open banking aims to empower people to take charge of their finances, enabling bank account holders to share their data with third-parties through what are known as open APIs (application programming interfaces). More than three million UK citizens and businesses are now using open banking-enabled products.

The CCS is also looking at the potential of integrating artificial intelligence (AI), particularly conversational AI – for example ‘chatbots’ or voice assistants – into the DRS.

‘Exciting to see what fintechs can provide’

“What we’re trying to do is bring fintech to the fore – it’s exciting to see what some of the fintechs can provide,” a CCS spokesperson told Global Government Fintech. “It’s less about open banking or AI in isolation, and more about all of this combined – the ability to see more dynamic data.”

Invites to tender for the framework will be issued in June and awarded in November.

The framework’s 19 lots will range from traditional debt recovery – for example, litigation and enforcement – to a new field termed ‘affordability solutions’.

There are various forces driving the CCS’s growing interest in fintech and how the DRS will operate. First is a belief that what fintechs can deliver for government has increased in the past couple of years. Second is a requirement for central government contracts to evaluate ‘social value’, as set out in what is known as PPN (Procurement Policy Note) 06/20 – this has to be applied to all new procurements from 1 January this year.

More broadly, the move comes as studies mount up showing the negative impact of the coronavirus pandemic on many citizens’ personal finances.

“It is essential that we consider the impact that debt can have on citizens and their individual financial circumstances, ensuring that action is balanced to effectively recover public money without detrimentally impacting on people’s lives during a period of potentially significant financial pressure,” the CCS spokesperson told Global Government Fintech.

“The team is now developing the Debt Resolution Services agreement to help the public sector to work with expert suppliers to identify and manage debt, taking into account financial vulnerability and treating people fairly, in line with government fairness principles [which were introduced in 2018]”.

Estimated total value of £550m

The DRS will effectively replace Debt Management Services (DMS), which the CCS described as a bridging framework after the closure of its ‘Debt Market Integrator’ (DMI) programme. The DMS is a single supplier agreement where the supplier manages panels of sub-contractors to deliver services. The CCS does have fintech solutions in existing frameworks, particularly around data amalgamation, but they are not used significantly.

The new DRS will apply from 2021-2024. It also has advisory and consultant lots for companies to work with ‘buyers’, for example government departments, to help select which companies on the framework would fit best with their objectives.

The CCS issued what is known as a ‘prior information notice’ (PIN) for the new DRS on 10 March.

The notice specifies ‘debt analytics (including open-banking and complimentary data and analytics)’ as one of the ‘core services’ that ‘may be included’, along with services such as ‘enforcement / warrant recovery services’ and ‘fraud and error prevention and analysis’. It cites an ‘estimated total value’ of £550m (about $762m).

The CCS said it has worked with organisations including StepChange Debt Charity, Money and Mental Health Policy Institute and the Money and Pensions Service to better understand where the issues are.

‘Supportive, analytical and agile’

The CCS, headquartered in Liverpool, supports the public sector by aggregating demand for the procurement of common goods and services. It estimates that £20bn of spend in total will go through its different frameworks this year, from police cars to office desks.

In 2020 the agency created a new ‘category’ for ‘Debt, Fraud and Error’ solutions to support public sector bodies to better manage debt, with a focus on the use of analytics and data. The new framework sits within that category. Many government bodies will continue to have their own (internal) debt collection solutions.

The CCS’s commercial lead for the DRS is Lee Edmonds, who works in its financial services group. He wrote on a blog last September saying that the public sector ‘needs to be supportive, analytical and agile’ in its approach to ‘help meet the public sector debt recovery challenge’.

‘Record sums of money have been paid out by the government to enable businesses to survive and employees to retain their jobs [during Covid-19]. At the same time, revenues have declined across the public sector, from tax and business rates to the repayment of overpaid benefits and unpaid fines,’ he wrote. ‘Personal debt is forecast to rise, as is unemployment and the number of people in debt with mental health illness while affordable credit could become even more scarce. People and businesses not used to falling into arrears have done so and will continue to suffer short-term financial shock. We need a plan, not just for the short term, but for the knock-on effects that will take shape over the coming years.’


‘Fairer Finance Hackathon’ winner targets local authorities – our news report (7 December 2020) on how the winner of a UK government-backed fintech hackathon to create a technological tool to help people with their finances is aiming to achieve take-up in local authorities across the UK – and potentially beyond