First-party fraud identified as potential risk as financial pressures impact affordability

LONDON, April 30, 2025–(BUSINESS WIRE)–The latest analysis of UK card payments from global analytics software leader FICO shows that spending fell in January and rose in February, as per usual seasonal patterns. However, January saw increases in missed payments across one, two and three months. In February there was evidence of consumers prioritising card payments, with decreases in cardholders missing one and two payments. An area of concern for credit managers is the persistent rise in customers missing three payments.

In discussions with leading financial institutions, FICO has also identified a growing trend in first-party fraud. This is where a cardholder intentionally makes a large purchase up to their credit limit, knowing that the payment they make will bounce. During the period that is required for the payment to clear, available credit may reopen on the card. This allows fraudsters to make additional purchases and increase the balance even further. By the time the payment is returned, and an insufficient funds error is received, the damage has been done. FICO is working with a number of card issuers to develop strategies where payments identified as high risk are held for a number of days until the payment clears. This helps to reduce these delinquent balances that end up going to charge-off.

Highlights

• Average credit card spending fell by 11% month-on-month in January (£765) but rose by 3% in February to £790

• January average balances fell by 0.6% month-on-month but rose by 0.5% in February, with the higher cost of living evident in a year-on-year increase of 5%

• By February the percentage of overall balance paid had dropped by more than 4% year-on-year to 35%

• The average balance of one missed payment increased in January and February, to £2,345 which equates to a 4% increase year on year

• The average balance that was two or three payments overdue also increased in February by 3% and 1.3%, to an average balance of £2,805 and £3,195, respectively

• The percentage of customers using credit cards to take out cash continued to decrease, down 3.8% in January and 3.5% in February, to 8.6% on the previous year, to 3%.

FICO Comment:

While the spending and balances patterns seen at the start of the year are typical, there was an unexpected increase in the number of customers missing payments in January. Risk managers should review and potentially refresh collections treatment and communication channels to ensure that customers facing affordability issues during the continuing uncertain economic climate are properly supported.