Deep Dive: How Consumers’ Perspectives On Payment Tools And Financial Wellness Are Shifting During The Pandemic

The pandemic has upended many consumers’ financial lives and typical purchasing behaviors, leading them to reconsider their go-to payment tools. Some of this change came as economic strain rose in the U.S. and unemployment became more widespread. These developments may make consumers more concerned than ever about when and how to finance the purchases they need. Even consumers who are feeling more financially secure may want to tap new tools to help them maintain their good financial standings and stay in control of their budgets. This month’s Deep Dive digs into new data regarding consumers’ financial wellness and its influence on the payment tools they select. These shoppers are taking a fresh look at when credit cards, debit cards and buy now, pay later (BNPL) options best serve their needs and circumstances, leading to new payment tool trends among both those who are and are not financially secure. 

Looking Beyond Credit Cards

Many consumers are finding it harder to pay their bills, according to a survey of 2,278 respondents that PYMNTS conducted in early January. Fifty-nine percent of participants reported having difficulty making ends meet each month, which could make them more wary of pulling out credit cards. 

Consumers living paycheck to paycheck still need to make purchases, of course, and they demonstrated more caution around taking on debt than their more financially secure counterparts. Only approximately 30 percent of those living paycheck to paycheck preferred to pay for eCommerce purchases with credit cards, while almost 49 percent favored debit cards. Those who were not in as tight economic circumstances appeared less concerned about such issues: More than 50 percent of respondents who are not living paycheck to paycheck preferred to use credit for online purchases, and nearly 28 percent used debit. 

Exploring BNPL As A Rising Financial Tool 

Consumers are not only making choices between debit and credit, however. BNPL options are also gaining attention from both financially stable and financially insecure consumers. BNPL payment plans typically allow customers to repay BNPL providers over four installments. This financing option could appeal to even financially secure consumers who wish to avoid credit card interest rates. Credit cards charge new customers an average of 17.9 percent interest and existing customers 14.6 percent interest, whereas some BNPL offerings charge flat late fees instead of interest and others set their interest rates at anywhere from zero percent to 30 percent. 

PYMNTS’ March and September 2020 surveys of 15,000 U.S. consumers found millennials who favor BNPL tend to say they are drawn to it because they feel the fees and interest rates are clearly laid out — a reason listed by 42 percent of respondents — and because it helps them monitor their spending, which was cited by 39 percent of respondents. Millennials’ attraction to the tool also appears to be growing, with 38 percent of this age group reporting in the September survey that they are “highly” interested in using BNPL — up from 32 percent in March. 

PYMNTS’ January 2021 research showed consumers who are living paycheck to paycheck are more likely to adopt BNPL services. Eighteen percent of financially insecure consumers used BNPL when purchasing online and a little over 11 percent used it in store, compared to the nearly 8 percent and nearly 3 percent of more financially stable consumers who used BNPL online and in store, respectively. 

Shoppers who did not live paycheck to paycheck still make use of BNPL offerings and tend to favor certain providers. Nearly 24 percent of financially secure consumers who use BNPL online turned to provider Afterpay, and nearly 10 percent of those living paycheck to paycheck did the same, for example. 

PYMNTS’ January 2021 research did not report consumers’ reasons for choosing the specific BNPL services they did, but certain factors might influence their preferences. BNPL providers partner with different retailers, for one, meaning that customers’ choices may be based on availability. BNPL providers also vary in how they charge customers for missed payment deadlines, with some charging interest and others levying flat late payment fees. Barriers to using the service can be different as well, because some BNPL providers assess customers’ creditworthiness before approving them. Any of these factors could lead to shoppers finding particular BNPL providers that best suit their needs. 

Consumers across the board may be paying closer attention to their purchasing and payments choices during this period of heightened economic uncertainty. Those living paycheck to paycheck may be looking for the cheapest methods that enable them to buy what they need, and even financially stable shoppers want to ensure they are getting the best deals possible and not paying unnecessary interest or fees. BNPL providers that can cater to these concerns could be well-positioned to win over more customers.