FICO Data: More UK Cards Are Gathering Dust

Everyone knows the UK economy is recovering, and retailers had a good Christmas. This upturn is coming none too soon, as our review of more than 38 million UK credit cards shows that the percentage of UK card accounts that are active has dropped from November 2012 to November 2013.

Our Global Business Consulting team looked at the percentage of accounts which are active (have a balance), and then further broke that down by vintage: New (0 to 12 months on books), Established (1 to 5 years) and Veteran (5+ years).

Key findings:

• Active rates overall dropped more than 10% to 47% since November 2013. 
• The older the account, the greater likelihood of it going inactive. The sharpest fall was for veteran accounts, which fell from 50% active in November 2012 to 43% in November 2013.
• Only New accounts have seen an increase, rising by nearly 8% to 72%. This could be due to the increase in 0% or low-rate balance transfer offers. 

One takeaway might be that issuers should focus on New accounts, but it is more expensive to add new accounts than to retain existing customers. FICO recommends that issuers review their offerings and increase their focus on stimulating activity on more mature accounts. A review will highlight any gaps and determine whether new offers are appropriate. These can include temporary reductions in APR or just interest rates for merchandise spend, and balance transfers for existing customers.

Some issuers are using more analytically sophisticated approaches, developing optimized strategies or targeting offers to customers based on their spending patterns. As issuers typically communicate offers via letter, they could extend this to include email follows up as well as using SMS, a lower-cost option. The latter also allows for real-time acceptance of offers.

Introducing learning strategies to determine what offer to make, when and the best communication channel to use can increase the success of any campaign. Creating campaigns with monitoring in mind is also recommended.