Consumers’ choice of payment method depends on factors such as their cash flow situation and access to credit products. For example, consumers facing cash flow shortages are more likely to utilize buy now, pay later (BNPL) than consumers without cash flow challenges. Among those frequently facing cash shortfalls, 8.9% reported using BNPL in the past 30 days. This is more than three times the 2.5% of consumers without such issues who said the same. One explanation is that consumers facing cash flow shortages have less access to other forms of credit. BNPL helps them fill the gap, especially when they need to pay for everyday necessities.
PYMNTS Intelligence also finds that cash flow shortages are most prevalent among paycheck-to-paycheck consumers, who already face the financial challenges. For many consumers, credit remains a popular payment method, yet its role differs significantly based on financial circumstance. In fact, those facing cash flow shortages are more than twice as likely to use credit out of necessity.
These are just some of the findings detailed in “How People Pay: Cash-Short Consumers Drive BNPL Usage,” a PYMNTS Intelligence exclusive report. This edition examines the growing use of BNPL among consumers facing cash flow shortages. It draws on insights from a survey of 2,211 U.S. consumers conducted from Oct. 7 to Oct. 24.
Cash-Short Consumers Are More Likely to Use BNPL
BNPL, a flexible alternative to traditional credit, allows consumers to split payments into manageable installments. BNPL has appeal, particularly among those facing cash shortfalls. In fact, cash flow compromised consumers are 3.5 times more likely to use BNPL to make purchases.
Data shows that 8.9% of respondents who frequently encountered cash flow shortages have used BNPL in the past 30 days. In comparison, only 2.5% of financially stable consumers reported using BNPL during the same period. This disparity illustrates the extent to which financially constrained individuals rely on BNPL.
For consumers facing cash shortfalls, BNPL offers a level of accessibility that traditional credit often does not. With lower barriers to entry, BNPL allows individuals to manage financial demands without the restrictions conventional credit imposes.
Cash-Short Consumers Tend to Be Millennials, Lower Income or Living Paycheck to Paycheck
Cash flow shortages are a common experience for a significant portion of the population. More than one-third of respondents reported facing such challenges. We find 22% of consumers say they sometimes experience cash flow shortages, and 13% report they experience cash flow shortages frequently.
Millennials are among the most impacted groups, with 17% experiencing frequent cash shortfalls. Baby boomers and seniors, at 6.6%, on the other hand, reported far fewer instances of financial strain. Income disparities further illustrate the divide. While 18% of consumers earning less than $50,000 annually reported frequent cash flow shortages, just 9.9% of those earning over $100,000 said the same.
Meanwhile, data reveals that paycheck-to-paycheck consumers are the most likely to face cash flow challenges. Among those who struggle to pay bills, 33% reported frequent cash flow issues, while 37% said that they sometimes face cash flow shortfalls. Even among those living paycheck to paycheck but managing their bills comfortably, 21% reported facing occasional financial shortfalls. These findings suggest that cash flow shortages are a pervasive issue for struggling consumers and can influence spending habits and payment preferences.
Using Credit Becomes a Necessity for Cash-Short Consumers
Credit remains a prominent way to pay. Nonetheless, our study reveals a stark divide in how and why consumers turn to financing. For those experiencing financial strain, credit often becomes a necessity rather than a choice.
In fact, those facing cash flow shortages are more than twice as likely to use credit out of necessity. Among consumers frequently facing cash flow shortages, 38% reported using credit out of necessity. In contrast, just 14% of financially stable individuals said the same. This highlights the role of credit can play as either a convenient tool or a lifeline.
Paradoxically, those who need credit the most often face the greatest barriers to accessing it. Many consumers are not able get credit due to bad or no credit history. Also the high cost of credit can be a barrier for struggling consumers. For financially constrained individuals, only 17% made retail and 16% made grocery purchases using credit cards, compared to an average of 34% for retail and 30% for groceries among the broader sample. Limited access drives many to rely on alternative credit options like BNPL to get through cash shortages. While traditional credit remains a vital resource for some, others need to turn to innovative alternatives to navigate financial constraints.
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Methodology
“How People Pay: Cash-Short Consumers Drive BNPL Usage,” a PYMNTS Intelligence exclusive report, is based on a survey of 2,211 U.S. consumers conducted from Oct. 7 to Oct. 24. This report examines the growing use of BNPL among consumers facing cash flow shortages. Our sample was balanced to reflect the U.S. adult population across key demographic variables: 51% of respondents identified as female, and 30% reported annual incomes between $50,000 and $100,000.
