FICO UK Credit Card Market Report: March/April 2023

Rhea-AI Summary

Unpredictable consumer behaviour puts lenders on high alert as deadline for new Consumer Duty Guidance nears. UK credit card spend has increased by 6.7% in March and 8.7% in April compared to 2022. Average active balance is 8.2% higher than last year. Percentage of accounts missing one payment increased by 22.8% in March but dropped by 17.9% in April. Lenders are concerned about increased spend but reduced percentage of payments to balance. The average credit card balance is back at pre-COVID levels. Lenders will monitor how consumers manage their financial commitments and any signs of increased financial stress. Key trend indicators show changes in average credit card spend, average card balance, percentage of payments to balance, accounts with missed payments, average credit limit, average overlimit spend, and cash sales/total sales.

Positive

• UK credit card spend increased by 6.7% in March and 8.7% in April compared to 2022.
• Average active balance is 8.2% higher than last year.
• Percentage of accounts missing one payment increased by 22.8% in March but dropped by 17.9% in April.
• The average credit card balance is back at pre-COVID levels.

Negative

• Lenders are concerned about increased spend but reduced percentage of payments to balance.

Unpredictable consumer behaviour puts lenders on high alert as deadline for new Consumer Duty Guidance nears

LONDON--(BUSINESS WIRE)-- The latest data from FICO on UK credit card trends paints a picture of considerable consumer financial volatility as the dual pressures of higher inflation and higher interest rates squeeze funds.

The ongoing inflationary challenges faced by consumers continue to be reflected in higher levels of credit card spend, compared to 2022 – with monthly spend up by 6.7 percent in March and 8.7 percent in April. This forms part of a long-term trend, evidenced by the fact that spend in April 22 was already 21% higher than the equivalent period in 2021. As a consequence of these increases in spend, the average active balance for both March and April 2023, is 8.2 percent higher than last year.

When comparing month-on-month movements in spend and arrears, the continuing juggling act being performed by many consumers becomes apparent. Data for March and April shows a continued see-saw in spend and repayments patterns. In March, spend was down 6.1 percent compared to February 2023; the percentage of accounts missing one payment was up 22.8 percent. In April there was a 17.9 percent drop in accounts with one missed payment, whilst the percentage of accounts having missed two payments reduced slightly. This suggests that many customers are juggling their finances, skipping payments one month and trying to make it up the next month.

Highlights

• Average total sales down month-on-month by 6.1 percent in March and up 12.1 percent in April at £735 and £825, respectively
• Percentage of payments to balance fell year-on-year in both months – by 4.1 percent in March and 6.1 percent in April
• Month-on-month, after falling by 15.6 percent in February, the percentage of accounts missing one payment jumped back up in March by 22.8 percent and then fell again in April by 17.9 percent
• Accounts with two missed payments were relatively stable month-on-month in March and April. However, year-on-year they are still significantly higher - by 20.2 percent in March and 19 percent in April
• Average balances across both months are up 8.2 percent year-on-year to £1,645 in March and £1,680 in April
• Another sign of financial stress is the use of credit cards to take out cash – in April this increased month-on-month by 4.5 percent and 9.4 percent year-on-year

FICO comment

The yo-yo pattern of financial management — seen for the last few months — reflects the general economic uncertainty, particularly for mortgage holders. With increased scrutiny as the new Consumer Duty Guidance comes into force on 31^st July, lenders will be wanting to apply the highest levels of account management.

Areas of particular concern will be the pattern of increased spend but reduced percentage of payments to balance. The average credit card balance has generally been trending upwards since the pandemic slump, and is now back at levels seen pre-COVID.

How consumers are managing their existing financial commitments — especially those who have found themselves, perhaps for the first time, with one missed payment — will also be important to monitor. As the percentage of accounts with one missed payment yo-yoed from March to April, lenders will be looking for any signs of increased financial stress, for example if the percentage of those missing two payments increases.

Currently it seems that cardholders are making a concerted effort not to roll arrears forwards, with the percentage of two missed payments only increasing by 2.1 percent in March and actually decreasing by 0.3 percent in April. However, with such volatile conditions, lenders will want to remain focused on these trends in the next few months.

Key Trend Indicators – UK Cards March 2023

Metric	Amount	Month-on-Month Change	Year-on-Year Change
Average UK Credit Card Spend	£735	-6.1%	+6.7%
Average Card Balance	£1,645	-1.0%	+8.2%
Percentage of Payments to Balance	37.99%	+0.4%	-4.1%
Accounts with One Missed Payment	1.75%	+22.8%	+6.1%
Accounts with Two Missed Payments	0.32%	+2.1%	+20.2%
Accounts with Three Missed Payments	0.20%	-6.4%	+28.4%
Average Credit Limit	£5,550	0.0%	+1.3%
Average Overlimit Spend	£95	+4.4%	-26.2%
Cash Sales / Total Sales	0.86%	-0.5%	-33.5%
Source: FICO

Key Trend Indicators – UK Cards April 2023

Metric	Amount	Month-on-Month Change	Year-on-Year Change
Average UK Credit Card Spend	£825	+12.1%	+8.7%
Average Card Balance	£1,680	+2.3%	+8.2%
Percentage of Payments to Balance	37.2%	-2.1%	-6.1%
Accounts with One Missed Payment	1.43%	-17.9%	+5.8%
Accounts with Two Missed Payments	0.32%	-0.3%	+19%
Accounts with Three Missed Payments	0.20%	-0.5%	+25.8%
Average Credit Limit	£5,555	+0.1%	+1.2%
Average Overlimit Spend	£90	-5.2%	-24.2%
Cash Sales / Total Sales	0.89%	+3.6%	-27%
Source: FICO

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, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, insurance, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in nearly 120 countries do everything from protecting 2.6 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO® Score, used by 90% of top US lenders, is the standard measure of consumer credit risk in the US and other countries, improving risk management, credit access and transparency. Learn more at www.fico.com.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20230627692368/en/

For further comment on the FICO UK Credit Card activity contact:

FICO UK PR Team

Wendy Harrison/Parm Heer/Matthew Enderby

ficoteam@harrisonsadler.com

0208 977 9132

Source: FICO

FAQ

What is the trend in UK credit card spend?

UK credit card spend increased by 6.7% in March and 8.7% in April compared to 2022.

How does the average active balance compare to last year?

The average active balance is 8.2% higher than last year.

What happened to the percentage of accounts missing one payment in March and April?

The percentage of accounts missing one payment increased by 22.8% in March but dropped by 17.9% in April.

What is a concern for lenders?

Lenders are concerned about increased spend but reduced percentage of payments to balance.

What is the current average credit card balance?

The average credit card balance is back at pre-COVID levels.