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

Highlights

• October sees second consecutive month of a fall in spending – falling £5 month on month
• Missed one and two payment rates rise
• Percentage of payments to balance increases – another over 8-year high

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. There was also growth in cash usage, albeit still well below pre-pandemic levels.  However, continuing the confusing picture seen all year, October also saw growth in the percentage of payments to balance.

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.

The rise in full balance payers is driven by accounts opened more than a year, with nearly 60 percent of those with an account opened more than five years paying the full balance. Those opened less than a year started to fall in May 2021, and this has continued into October, potentially a forewarning of financial problems.

Spending over card limits drops
The percentage of accounts breaching their limit decreased 9.5 percent in October, potentially linked to the continuing drop in average spend, and is 55 percent below October 2019. The average amount being spent above limit increased £2 and is 13 percent higher than two years ago.

Cash usage growth starts to slow
October saw lower growth in the percentage of consumers using cash compared to September, increasing by 1.7 percent. Cash usage is on a par with a year ago but is 55 percent below pre-pandemic levels. Cash as a percentage of total spend decreased and is 9 percent lower than a year ago and 37 percent below October 2019. The results may be due to the increase in the contactless limit mid-October from £45 to £100. As more issuers and merchants accommodate this change the FICO November data will show the impact of a full month.  

Looking Ahead
FICO data for November and December card patterns will show the impact of two further months with no furlough support, increasing retail and energy prices and seasonal spend. It will be clear in the first quarter of 2022 how sustainable the Christmas credit card spend is, or if the extra lockdown savings will remain a lifeline for some.  November data will be the first full month reflecting the increase in the contactless limit to £100.

With uncertainly remaining regarding some consumers financial stability, especially with the added pressure of Christmas, lenders will continue to focus on collections in the near term. As the extra savings continue to have a positive impact, the outlook may be more optimistic with lenders moving forward with business-as-usual approaches.   

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.