Blog – The commercial case for robust income & expenditure assessments

For years, affordability checks were seen primarily as a regulatory obligation. But the evidence now shows something more powerful: robust income and expenditure (I&E) assessments don’t just protect customers — they also deliver measurable commercial benefits.

Firms in lending, debt purchase, consolidation and collections are facing multiple pressures: rising debt levels, workforce shortages, and increasing regulatory expectations. The FCA’s Borrowers in Financial Difficulty Review and Policy Statement 24/2 both highlight the need for full affordability checks and sustainable repayment plans. That’s a compliance imperative — but it’s also a commercial opportunity.

Workforce efficiency – Completing I&Es is demanding, time-consuming work. In many firms it falls to entry-level agents, creating recruitment and retention challenges. But by using guided digital tools:

• Agent time on I&Es can be reduced by up to 90%.
• Training time can fall by 80%, with technology prompting agents through complex cases.
• Customers are increasingly willing to self-serve, with around 30% switching from agent-led to digital assessments.

Improved repayment values – Strong affordability checks lead to stronger outcomes:

• Repayment values improved by 60% on average.
• Sustainable repayment plans are up by around 5%, reducing rework and default.
• Identifying unclaimed benefits can boost customer resilience, with some firms finding an extra £350 or more per month for customers.

Regulatory alignment and trust – The FCA expects I&Es to be reliable, auditable and shareable. With the right systems in place:

• Every interaction can be quality checked with a full audit trail.
• Assessments can be passported, helping customers share data with other creditors.
• Messaging and journeys can be A/B tested to evidence which approach delivers the best customer outcomes.

Robust affordability assessments are no longer just about compliance. They unlock efficiency for agents, improve repayment performance, and build customer trust. Firms that invest in the right solutions will not only meet the regulator’s expectations — they will also strengthen their commercial position.

At Inicio we help firms realise these benefits every day. Our affordability solution is consistent, configurable and fully auditable. It reduces agent workload, increases digital uptake, and provides MI that proves effectiveness. In short: a regulatory must-have that delivers clear commercial returns. Could your firm benefit?

Why not speak to us today. 

Blog – The role of AI in financial services: useful, responsible, and focused on outcomes 

Artificial Intelligence is no longer just a future possibility for financial services; it is already part of everyday processes. From analysing large amounts of data to supporting better conversations with customers, AI has the potential to reduce cost, increase consistency and improve outcomes. 

But the opportunity comes with responsibility. For firms working in credit and collections, AI must always be deployed in ways that are transparent, explainable and aligned with regulatory expectations. The FCA has been clear: existing rules, including Consumer Duty, apply regardless of the technology. 

Importantly, the regulator is not discouraging innovation. In fact, the FCA has launched initiatives such as its AI Showcase, bringing together firms, academics and technologists to explore safe, practical adoption. The message is clear: AI has a role to play in the future of financial services, provided it delivers good outcomes for customers. 

So, what should creditors and collectors take away today? 

 

• Start with problems, not with tools. 
  The best AI use cases are rooted in specific challenges: identifying vulnerability earlier, ensuring affordability conversations are consistent, or reducing repeat failures in repayment plans. 
   

• Keep humans in the loop. 
  AI can surface insights, but customers must be able to speak to trained agents who can make the final decisions. Human accountability is non-negotiable. 
   

• Focus on explainability. 
  If an agent or manager cannot understand why the AI has flagged something, it cannot be relied on. Transparency builds trust with staff, customers and regulators alike. 
   

• Test outcomes, not just accuracy. 
  It’s not enough for a model to be “right” firms must evidence that it leads to fairer, more sustainable customer outcomes. 
   

• Treat AI governance like any other system. 
  Keep an inventory of models, test them regularly, and log changes. Think of it as QA for your technology. 

 Is AI Really Replacing Jobs — or Just Changing How We Work? 

 

It’s natural that AI sparks concern about automation and job loss. But in credit and collections, the opposite is true. The FCA has been clear that accountability must remain with people, not systems. That means AI should be seen as a support tool, improving initial engagement, surfacing insights, handling repetitive admin, and reducing the cognitive load on agents, while leaving empathy, decision-making and customer care firmly in human hands. 

When positioned this way, AI strengthens roles rather than replaces them. Agents gain the confidence that their conversations are consistent and well-supported, while customers benefit from interactions that feel more personal and less process driven. 

 What it all means.

 

AI offers huge potential in financial services, and the FCA itself is encouraging exploration. The focus is not on stopping innovation, but on ensuring adoption is responsible, explainable and delivers better customer outcomes. 

The Inicio affordability solution adopts AI technology in ways that are consistent, configurable and auditable. Our solution reduces cognitive load for agents, ensures every interaction can be reviewed, and delivers clear MI on effectiveness — turning advanced AI tools into practical, trusted outcomes. Could your affordability solution benefit from AI? Why not speak to us. 

FCA enforcement: lessons from historic cases

Over the last 18 months the FCA has concluded a series of enforcement actions relating to how customers in financial difficulty were treated in the past.

In October 2024, the regulator fined TSB Bank plc £10.9 million for historic issues between 2014–2019, where some customers in arrears may not have received consistently fair treatment. Since then, TSB has invested heavily in systems and training and paid £99.9m in redress to affected customers.

Earlier in May 2024, HSBC UK, HSBC Bank and M&S Financial Services received a £6.28 million penalty for shortcomings identified between 2017–2018. HSBC had already initiated its own proactive redress programme, with £185m returned to customers, alongside significant investment in improvements.

Outside the high-street banks, Volkswagen Financial Services (UK) Ltd reached a settlement of £5.4m in October 2024, again linked to historic treatment of customers in financial difficulty.

Although these failings took place several years ago, the FCA’s decisions in 2024 send a clear message: affordability assessments, realistic repayment plans, and fair treatment in arrears remain supervisory priorities.

So, what should creditors and collectors be taking away from these actions?

 

1. Evidence affordability, don’t assume it. The FCA expects firms to go beyond a simple income-and-expenditure form. Affordability assessments should be based on up-to-date, accurate information and challenged where figures don’t stack up. Collectors need training to spot red flags and probe sensitively.

2. Make repayment plans sustainable. Unrealistic arrangements don’t help the customer or the creditor. Firms should track how many plans fail within the first few months and use that data to improve conversations, policies and systems.

3. Invest in systems that support the front line. Most of the historic failings came from poor MI, weak controls, or systems that didn’t equip staff with the right information at the right time. Technology should enable better decisions, not just record them.

4. Close the loop with QA and governance. Quality assurance should include affordability checks, treatment of vulnerable customers, and sustainability of forbearance. Findings must feed back into policy, training and incentives, not just sit in reports.

5. Align everything with Consumer Duty. At the heart of these fines is a simple point: customers must receive outcomes that are fair, sustainable and in their best interests. Firms should test arrears journeys against the Consumer Duty outcomes: understanding, support, and fair value.

It’s far easier than it sounds when you have the right tools, Inicio help firms deliver on the Financial Conduct Authority expectations with modern Artificial Intelligence

 

While the issues at TSB, HSBC and VWFS are historic, the FCA’s enforcement in 2024 is a live reminder. Creditors and collectors should treat these cases as a signal to check their own practices today. Affordability, sustainability and fair treatment are not optional extras — they are regulatory expectations, business imperatives, and, ultimately, the right thing for customers.

At Inicio AI we help firms deliver on these expectations. Our platform ensures consistency for every user, whether that’s an agent or a customer. It is designed to reduce cognitive load and training needs, configurable so each client has something unique, and fully auditable with every utterance easily reviewed. Our MI provides clear evidence of how effective affordability assessments and income & expenditure conversations really are, turning regulatory priorities into measurable outcomes.

Curious how this could work in your organisation? We’d love to show you. Contact our team today and book your demo.