Banking and Payments Intelligence Report
Growing Weary of Financial Challenges, Bank Customers Reluctantly Turn to Buy Now, Pay Later
While the dog days of summer won’t be here for a few months, it seems that financial fatigue has bank customers in the U.S. feeling the heat.
Whether the culprit is a steady diet of ominous news about the recently resolved debt ceiling crisis or the persistent (albeit improving) presence of inflation, customers are back in the doldrums about their finances. According to the latest J.D. Power data, customer satisfaction with their financial condition declined to levels not observed since December 2022, even as financial health scores remain steady.
Against this backdrop, customers have become more receptive to alternative loan programs, with Buy Now, Pay Later (BNPL) options quickly gaining acceptance. Interestingly, though, customers are turning to BNPL even as they believe it to be contrary to their own self interests.
Fatigue Sets In
After four consecutive months of no noteworthy change in overall financial health, 44% of respondents say they are vulnerable (up from 41%) and just 31% are financially healthy (down from 34%).
The overall level of inflation recognition rose slightly to 67%: a mark that is largely in line with the previous four months. The percentage of customers who said the price of goods is increasing faster than their income also mostly remained stable. Still, that didn’t prevent customer sentiment about their financial health from taking a precipitous fall. Customer satisfaction with their own financial health is the lowest it has been since December, and lower than it was at any point during the peak of inflation last summer.
As customers try to manage their financial situations, BNPL programs have piqued their interest as an option to alleviate their stress. Overall, 80% of customers say they are aware of BNPL products, and many are utilizing these options. More than one-third (34%) say they have used a BNPL program in the past 90 days.
Predictably, customers who are overextended are most likely to use BNPL options (55%), but even 30% of customers that have healthy financial situations are utilizing BNPL. For customers that haven’t used BNPL in the past 90 days, though, the overextended and stressed customers are less likely to be familiar with the products. Overall, only 31% are completely unfamiliar with BNPL.
Customer Perceptions Vary on Value of BNPL
When asked further about their experiences with BNPL, customers who recently used one of these products were more likely to have a positive attitude. Just 36% of customers that used BNPL in the past 90 days said they “somewhat agree” or “strongly agree” that BNPL benefits the lender, compared with 47% that have not used BNPL.
Educate Now, Benefit Later
Even as overall financial health remains steady, it’s clear that customers are feeling a cumulative effect of the past two years. As a result, banks need to understand that beleaguered feeling and tailor their customer outreach and their product offerings to account for the fact that customers have been barely holding it together for a significant period.
BNPL is a reasonable option for some customers and might not be the right fit for others. As their primary financial partners, banks are uniquely positioned to help customers understand who stands to benefit from leveraging BNPL, and for those that don’t, presenting an alternative option that may be a better fit. If banks can do this successfully, they’ll be able to retain customers, increase the use of their in-house services, and build better relationships.
