Leveraging Big Data for Affordability in UK Banking

This document is a technical report that discusses the utilization of big data to enhance affordability assessments in the UK banking sector. It outlines the importance of transactional data in building timely and customer-centric expenditure models that outperform traditional Office of National Statistics (ONS) models. The report details various data sources, including direct customer data, bureaux data, and internal transactional data from Virgin Money. It highlights the strengths and weaknesses of each data source and emphasizes the need for accurate data capture to inform lending strategies. The report also presents insights into expenditure trends, noting significant increases in grocery spending and essential household bills. Additionally, it discusses the implications of price cap changes and the importance of monitoring high-risk transactions. The findings aim to support both acquisition and back book affordability strategies for financial institutions, particularly in the context of the ongoing cost-of-living crisis.