FICO Data: Warning Signs for New Card Accounts in Ireland

Our analysis of UK and Ireland card trends in the FICO^® Benchmark Reporting Service has revealed some worrying trends for cards issued in Ireland. Over the past few months, the percentage of new Irish card accounts that are delinquent has climbed to around 10%, more than twice the average for UK cards.

We see a similar trend with delinquent balances on new Irish cards, where 13.5% of balances were delinquent in December, compared with 3.5% for UK cards. New accounts are those on book less than a year.

This indicates a riskier population are being accepted in Ireland, and it is worth Irish issuers identifying the reasons for this, as changes to originations policies may be needed. The trend is reinforced by the recent sharp rise in average credit lines for new accounts in the Irish market, allowing potentially higher delinquent balances to flow through.

Average delinquency balances on all cards are more in line with the UK, despite credit limits being approximately 18% lower than the UK, and the more mature accounts are influencing this. For new accounts, though, average 2-cycle delinquent balances are more than 36% higher than in the UK.

Other Trends in Irish Cards vs. UK Cards

• More accounts use cash in Ireland (12.4% vs. 6.2%) and the most noticeable difference is for new cards (27.7% vs. 12%). The proportion of cash sales to total sales is also higher, again more noticeably for new accounts, with average total sales (combination of cash and merchandise) higher in Ireland.
• Not surprisingly, looking at the delinquency rates, a higher proportion of accounts are not paying the full amount due in Ireland. However, the highest proportion of accounts in both markets pays the full balance off each month.
• There is a higher proportion of accounts with a direct debit in the UK. Lower rates in Ireland are influenced by accounts >1 year on book, so there are opportunities here to promote direct debit usage as well.
• Average credit lines for accounts >1 year on book Ireland are lower than in the UK. This is influenced by the difference in the regulations, as limits can only be increased at the request of a cardholder in Ireland. However, average credit lines on new Irish accounts have moved noticeably above the UK average in July 2017 and have remained at this level since.

Given these trends, it is not surprising to see a higher overall percentage of overlimit accounts in Ireland. Despite the higher average lines for new accounts in Ireland vs. the UK, the percentage of overlimit accounts also exceeds the UK average. The average amount overlimit in Ireland for accounts <5 years on book is significantly higher than in the UK. Collections teams could review to determine if specific action is required on this subpopulation.

FICO’s Benchmarking Services

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 and Irish card issuers. For more information on the new service, please contact me at staceywest@fico.com.