New data from FICO, the analytic software company, shows continued improvement in the health of mature UK credit card accounts, along with worrying signs for newer accounts.
In June, the percentage of current (non-delinquent) accounts that have been on the books for 12 or more months reached its highest value over the last two years. In addition, the average current balance among mature accounts was £49 higher than in June 2014, and £106 higher than in June 2013.
Average balances that were one or more cycles delinquent reached their lowest point in two years.
However, there were also warning signs for new accounts, those that are less than a year old. The percentage of new accounts that are two cycles delinquent has risen 14 percent since December 2014, and average delinquent balances have risen 7.5 percent year on year.
In addition, the average amount overlimit for new accounts reached its highest point in more than two years — this figure has been rising since January 2015. The percentage of new accounts that are overlimit is also increasing.
West recommended issuers take three steps related to new accounts:
• Review application processes and scorecards to make sure they have been aligned with more recent growth objectives, especially if the change in product focus attracts a different account profile.
• Review the initial credit limits to make sure that the level of unused exposure does not increase and negatively impact the Basel Capital Requirements, and to avoid higher future losses.
• Review management of current, overlimit accounts to determine whether special treatment is required on this vintage, as well as checking collections processes to ascertain whether to focus on new accounts at specific cycles. “There may be warning signs that can be translated into pre-collections activity,” West said.
The card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service, which compares overall market performance in the UK cards market with individual card issuers’ performance. The data sample comes from client reports generated by the FICO® TRIAD® Customer Manager solution in use by most UK card issuers.
FICO has recently released its new Risk Benchmarking Service which forms part of the P&L Insight Suite offerings. This service includes an expanded list of measures that gives card issuers a better view of their industry position in order to guide strategic changes.
For data, background and forecasts on FICO & UK: Search CardWeb.com’s CardFlash® Library of more than 58,000 archived articles; Access CardWeb.com’s CardData® for current and historical Performance, Portfolios, Profiles, etc. Visit RAM Research® (ramresearch.com) for quarterly and annual forecasts covering more than 150 metrics. [complimentary or deeply discounted access to CardWeb.com subscribers].
Additional database resources include CardWeb.com’s CardExecs® – comings & goings of payments movers & shakers; CardWeb.com’s CardWatch® – ears & eyes on marketing globally (57K items); and CardWeb.com’s CardPixes® – form & function of card design (7K items).