Assessing the financial vulnerability of individuals has become a crucial aspect for organisations, especially in the financial industry, to determine the affordability risk of individuals and comply with the FCA's regulations. However, assessing consumer vulnerability is not easy, and current methods could be sub-optimal. This is where Infinian's Affordability Risk Data and Model comes in, providing a two-solution approach to assess individuals' affordability risk.

One of these solutions is the 'Disposable Income Model,' which uses over 1 million unique credit applications covering the last 12-month period to estimate housing and essential cost of living figures on highly targeted demographic groups. The data collected can be used to estimate costs on an 'individual circumstances' basis, a requirement highlighted by the FCA. The Infinian model also assesses financial resilience/vulnerability where a match is found.

In contrast, the ONS released a new set of income and expenditure data covering 12 months up to March 2022. However, reviewing the ONS data and comparing it with Infinian's data, it has become apparent that the ONS data sample is much smaller and demographically skewed away from a population that would likely be active in the credit marketplace. The ONS sample includes 5,620 households, represented by 10,260 individual respondents, and 75% of respondents are homeowners, over half of whom own their property outright. This contrasts Infinian's sample of 1.3 million records, which has 11.1% of homeowners.

Moreover, while the ONS data has individual tables for each item of interest, such as region, household composition, residential status, and income group, combining/cross-referencing these items to get a combined view of expenditure is challenging. Using the ONS tables to estimate outgoings for many people seeking credit accurately makes it challenging. On the other hand, Infinian's Disposable Income Model uses a targeted, configurable look-up to estimate housing and essential cost of living figures on a wide variety of demographic groups, providing a more accurate estimate of an individual's expenditure and, therefore, their disposable income.

The ONS data also has 1% stated as living rent-free, and there is no clarity on applicants who live with parents/family, whereas Infinian has 19.9% living with parents/family. This suggests that the ONS data is unlikely to estimate outgoings accurately for a significant proportion of people seeking credit. Infinian's data, on the other hand, is based on credit applications covering the last 12-month period, providing a more accurate picture of an individual's financial circumstances.

In conclusion, while the ONS data is widely used, the skewed demographic sample and inability to combine/cross-reference items make it challenging to accurately estimate an individual's expenditure / disposable income, particularly for individuals seeking credit. On the other hand, Infinian's Affordability Risk Data and Model provides a more accurate and targeted approach to estimating an individual's expenditure / disposable income and assessing financial vulnerability, making it a reliable tool for organisations to comply with the FCA's regulations.