FICO urges banks to spot vulnerable customers earlier

FICO has urged banks to use dynamic profiling to identify financially vulnerable customers earlier, arguing that the approach can reveal signs of stress at least 40 days before customers become delinquent.

The analytics software group said banks still rely too heavily on point-in-time measures such as debt-to-income ratios, over-indebtedness and low savings when assessing vulnerability. In its view, those measures tend to identify customers already in difficulty rather than those heading towards it.

The call comes as UK unemployment reached 5.2% in the October to December period, which FICO described as a near five-year high, amid wider economic uncertainty. It argued that these conditions make it more important for lenders to spot early signs of financial strain without waiting for customers to disclose problems themselves.

According to FICO, dynamic profiling creates a continuously updated customer profile using a wide range of data sources. This is intended to provide a real-time picture of risk and behaviour over time, allowing banks to track change rather than rely on static snapshots.

The approach can include changes in income and spending, as well as non-monetary signals, such as customers checking debt advice pages or changes in the pattern and speed of their actions that may indicate a departure from normal behaviour.

FICO argued that many lenders already use similar information, but not in a way that reflects how quickly a customer’s position may be changing. It said real-time behavioural signals can show when someone is beginning to lose control of their finances, even if their current position still appears stable.

Mark Whale, Key Account Manager at FICO, said banks should move away from systems that depend on customer disclosure or retrospective assessment.

“Banks continue to rely on point-in-time indicators of consumers’ situation,” Whale said. “Assessing debt-to-income ratios and monitoring for over-indebtedness or low savings are diagnostic tools for existing crises, not early warning systems. Even the apparently ‘proactive’ speech analytics approach is inadequate, as it depends on customers disclosing the sensitive information that they are having financial problems.”

FICO linked the issue to regulatory expectations under the Financial Conduct Authority’s Consumer Duty, which requires firms to consider customer outcomes and support vulnerable consumers. It said more continuous monitoring could help banks intervene before customers enter severe distress.

Whale said lenders often focus on what has already happened in a customer’s finances rather than identifying the trajectory that led there.

“Creditors ask customers what has gone on before, requesting details of the financial moves that led them to an unmanageable position,” Whale said. “Yet these firms have not guided customers’ calculations before they ended up in losing positions.

“StepChange reported that ‘lack of control over finances’ remained the most selected main reason for debt in September 2025 at 18%, closely followed by ‘cost of living increase’ at 17%. Banks do analyse spending ratios and credit scores, but these remain static snapshots and often fail to reveal acceleration towards financial difficulty. Instead, dynamic profiling combines real-time events and behavioural signals to produce a continuously updated picture of a customer’s financial trajectory. This allows banks to detect when a customer becomes vulnerable, even if their current financial position looks stable.”

“Proactive detection means identifying customers heading towards financial difficulty before they reach crisis point, in line with the FCA’s Consumer Duty. To meet these regulatory expectations and genuinely protect customers, banks must stop asking ‘Where is the customer today?’ and start asking ‘How quickly are they moving towards trouble?’

“Dynamic profiling allows banks to anticipate financial difficulty earlier, provide meaningful support, and ultimately help customers maintain control over their financial lives,” Whale concluded.

The debate over early detection has grown as lenders face pressure to show they can identify vulnerability in a timely way, particularly when rising living costs and weaker labour market conditions can quickly alter household finances. Traditional affordability checks and credit risk models remain central to lending decisions, but firms across the sector are also examining how behavioural data can be used to spot warning signs earlier.

FICO said evidence from its clients suggests dynamic profiling can identify those warning signs well before a missed payment occurs. It argued that banks should move from measuring a customer’s condition at a single moment to tracking whether that customer is moving towards financial difficulty.