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Friday, May 20, 2022

FICO UK Credit Market Report October 2021: Are Lockdown Savings Running Out?

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New FICO data suggests the tide might be turning on consumer finances with average card spend falling and early missed payment rates rising as furloughs finish

LONDON, Dec. 16, 2021 /PRNewswire/ — Global analytics software provider FICO today released its analysis of UK card trends for October 2021 with the first signs that lockdown savings — which have appeared to underpin consumer confidence over the last 18 months — may be running out for some. Even though October saw the contactless limit on cards increased to £100, average card spend fell and missed payment rates increased.

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Against this backdrop, it is even more critical for lenders to focus on identifying behaviour trends to recognise signs of financial stress, particularly as seasonal spending ramped up in November and additional economic pressures may be seen as a result of the Omicron variant, and rises in fuel costs.

UK card average spend falls for second consecutive month

The average spend on UK credit cards in October 2021 fell a further £5 to £703. However, this is £55 above pre-pandemic spend levels. Average sales in 2021 have increased 23 percent, compared to a 4.5 percent drop this time last year.

Percentage of accounts missing one and two payments rose in October

Another sign of financial duress increasing is the percentage of accounts missing payments, which rose marginally in October, and their associated balance as a percentage of total balance, which remained stable. However, the percentage of accounts missing payments is 31 percent lower than two years ago, and the percent of total balance is 18 percent below. 

Only average balances on accounts missing two payments increased in October, and is 6.4 percent above two years ago. Consumers with two missed payments were £147 higher than two years ago. Those missing three, four or more payments saw an increase of 14 percent or £352 and 14 percent or £384 respectively.

Percentage of payments to balance continues to increase – at another over eight-year high

On a more positive note, the percentage of payments to balance increased to another over eight-year high, although the growth rate has slowed. Year-on-year it is 21 percent higher and 28 percent above October 2019.

These card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service. The data sample comes from client reports generated by the FICO® TRIAD® Customer Manager solution in use by some 80 percent of UK card issuers.

About FICO

FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions.

Learn more at https://www.fico.com

FICO and TRIAD are registered trademarks of Fair Isaac Corporation in the U.S. and other countries.

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