As U.S. consumers face cash flow shortages, many are turning to alternative payment methods like buy now, pay later (BNPL) to help them manage their financial strain.
According to a PYMNTS Intelligence report, “Cash Flow Shortages Drive Consumers’ BNPL Usage,” financial situations influence payment choices, showing cash-short consumers are more likely to use BNPL, emphasizing the importance of flexible payment options for those with limited access to traditional credit.
Buy now, pay later (BNPL) is popular, particularly among consumers facing financial difficulties. According to the report, consumers who frequently encounter cash flow problems are 3.5 times more likely to use BNPL, with 8.9% of these consumers using it in the past 30 days, compared to just 2.5% of those without such challenges. This illustrates BNPL’s role in helping people manage their purchases when other credit options are unavailable.
BNPL’s appeal lies in its flexibility, the report noted, allowing consumers to break payments into smaller installments. Unlike traditional credit, BNPL offers a more accessible solution with fewer barriers and no high interest rates, making it a valuable tool for those who struggle to cover immediate expenses.
Given a large portion of the population is affected by financial strain, cash flow shortages are not an isolated issue. According to the report, 22% of consumers experience cash flow shortages occasionally, while 13% report facing such challenges frequently.
Millennials are particularly impacted by these financial difficulties, with 17% saying they experience cash shortfalls regularly. By comparison, only 6.6% of baby boomers and seniors face similar challenges.
Income also plays a crucial role in cash flow issues. Nearly 18% of consumers earning under $50,000 annually report experiencing frequent cash flow shortages, while less than 10% of those earning more than $100,000 face the same problem.
Additionally, individuals living paycheck-to-paycheck are most likely to experience cash flow challenges. Among this group, 33% report frequent cash shortages and another 37% face occasional financial strain. These findings reflect the widening economic divide, with more consumers turning to alternatives like BNPL to make ends meet.
While credit cards remain a popular payment method, those facing cash flow shortages are more likely to rely on credit out of necessity. According to the report, 38% of consumers with regular cash flow issues use credit, compared to 14% of those without financial strain.
But these consumers often face significant barriers, including high credit costs and poor credit histories. As a result, only 17% of cash-strapped consumers use credit for retail purchases and 16% use it for groceries, compared to 34% and 30% of the broader population.
BNPL has become an important alternative for consumers who may not qualify for traditional credit. It offers a flexible way to manage cash flow and make necessary purchases, providing an accessible option without the barriers of conventional credit.
