How Vulnerability Indicators Can Drive More Informed Decisions

How TransUnion supports businesses with financial stress and vulnerability indicators now

TransUnion’s financial indicators, indices and datasets are wide ranging and can support businesses across the customer lifecycle, throughout acquisition with Affordability Report, customer management using TrueVision trended data, and early care arrears stages to identify, indicate and in some instances predict financial vulnerabilities consumers are experiencing, as well as those displaying signs of financial stress.

Identifying consumers showing signs of financial vulnerability

There are several indicators that businesses can use to identify signs of financial vulnerability including: income shock, low-income indicators, high debt to income ratios, high debt levels, disposable income stress, and budget deficit indicators. In response to recent macroeconomic pressures, TransUnion has developed new indicators including mortgage payment shock and water and fuel poverty – valuable additions especially as the impact of the cost of living crisis continues to be felt. These indicators help businesses get a clear picture of what is happening to their consumers and where action may need to be taken.

Detecting financial stress

To detect financial stress TransUnion offers indicators that show: use of high-cost credit, regular use of overdrafts, persistent debt such as credit cards, being overlimit on credit, using revolving credit, debt trajectory and derogatory data such as CCJs on file with associated collection searches. These indicators offer businesses a wider data picture of the consumer’s financial experience, empowering them to take swift action to support consumers and avoid them falling foul of greater financial harm.

Determining signs of financial difficulty

TransUnion can also determine signs of financial difficulty through indicators displaying missed payments on mainstream credit, utilities arrears, defaults, late payments and arrears, forbearance on credit, debt management plans, County Court Judgments (CCJs) and insolvencies.

Data innovation and partnership: bridging the gap to provide businesses visibility across the four drivers of vulnerability

TransUnion has strong financial stress indicators in the resilience and life event categories of the FCA’s four drivers of vulnerabilities, however, our ability to support businesses and vulnerable consumers in the health and capability categories was sparse. TransUnion’s purpose is to use Information for Good, through economic inclusion, great experiences and personal empowerment for consumers and businesses. With vulnerability such an important topic, we worked to find a partner to help us find alternative data sources to bridge the gap.

We’ve partnered with VRS, a UK not-for-profit organisation dedicated to supporting vulnerable consumers. VRS offers consumers a single platform to register their vulnerable status, sparing them from repetitive and challenging conversations with various lenders and organisations.

This partnership allows access to a comprehensive, independent register of vulnerable individuals, empowering TransUnion to identify vulnerabilities (categorised into cognitive ability, debt, life event, financial, fraud and physical attributes), merge them with financial indicators, and provide them to businesses, empowering organisations to make informed decisions in alignment with regulatory guidance.

What this partnership means for consumers and businesses

The partnership will enable TransUnion to produce a comprehensive set of vulnerability indicators which cover all four FCA vulnerability drivers, enabling businesses to gain deeper and broader data insights that they can use to more effectively identify, predict and protect vulnerable consumers at risk of harm.

Adding to this Helen Lord, CEO of VRS shares “the partnership between VRS and TransUnion is a massive move towards a central route for consumers to share their vulnerability. And it's addressing a problem that every single sector has, every regulator is facing. It is a massive step towards our ambition of having that single vulnerability route that will support consumers.”

Kelli Fielding – Director of Solutions at TransUnion UK – says “our collaboration with VRS marks a significant leap in understanding consumer vulnerabilities. Our data shows that financial and non-financial vulnerabilities are linked and by merging these datasets, we empower lenders to offer tailored support."

Sam Newman – TransUnion’s vulnerability expert - goes on to explain further: “Through TransUnion incorporating VRS non-financial indicators into our own existing vulnerability indicators we’ll create a simple-to-use, powerful data set, that businesses can take through us directly, and use effectively in their decisioning and operations.”

Vulnerability is wide-ranging and can be difficult to detect in large data sets – especially non-financial vulnerability, which is less readily accessible. The FCA Consumer Duty guidance calls on firms to take more accountability in treating vulnerable customers fairly, preventing them from harm and offering them greater financial inclusion, choice, and empowerment. TransUnion can support lenders now with financial indicators and indices across the vulnerability spectrum.

Through the unique partnership between VRS and TransUnion, we’ll soon be able to combine non-financial and financial vulnerability indicators together, empowering businesses with robust coverage across all four drivers of vulnerability. This enhanced view of vulnerability will give greater representation of consumer vulnerabilities and help businesses create informed treatment strategies and demonstrate that they’re actively looking to identify vulnerable consumers, and keep them from harm, as part of their regulatory obligations.

Read more about vulnerability in our latest ebook: Managing Vulnerability: Leveraging New Data to Improve Customer Outcomes.