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Recent data from the Joseph Rowntree Foundation reveals approximately 5.7 million UK families are burdened with unsecured debts. Over 50% of individuals resorting to credit for bill payments are entrapped in loans from high-cost lenders. With a third of these individuals finding themselves entangled in three or more loans.
Vulnerable segments of society, such as those reliant on fixed incomes or experiencing income growth slower than inflation, are poised to bear the brunt of this difficult financial landscape.
Credit bureau data
Credit bureau information has traditionally been used to assess credit worthiness, particularly at the point of application. This data gives a snapshot of a consumer’s financial position but offers a backward-looking view. The usefulness of this data for predicting future financial health and emerging financial distress is limited.
In addition, companies offering buy now pay later facilities do not report to the credit bureaus which leaves the true extent of consumer debt undetected, particularly at a time of year when these facilities have been utilised in the run up to the festive period.
Categorised bank statement transactions
Bank transactions from a consumer bank account give a much clearer picture of consumer spending behaviors. Decision makers can see whether a consumer is becoming over leveraged and the impact of additional economic pressures on their financial health in the future.
Atto provides a view of bank transactions to help decision makers detect early signs of consumer distress. Categorised transactional data provides a clear view into a consumer’s ability to service debt and afford new borrowings.
By monitoring income and identifying debt-related outgoings, decision makers can use the Atto platform to understand the current and future financial health of a consumer, making it easy to identify any early signs of distress.
The example below, taken from Atto’s financial health report, demonstrates a negative trend a portfolio manager could typically view on a consumer. Whilst income appears to remain constant, income from a stable source, such as employment, has dropped whilst debt servicing obligations have increased. The information is available within seconds of a consumer connecting their account.
Open banking data is the answer
Only with open banking can these trends be identified. Open banking data is enabling portfolio managers to take early action and reduce the risk of bad debt, ensuring that consumer repayment obligations are structured in an affordable manner.
For more information, or to view the data yourself, get in touch by filling out the form at the bottom of the page.
