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Credit Cards and BNPL Instruments Key to Financial Well-being

Credit Cards and BNPL Instruments Key to Financial Well-being

Credit cards and BNPM instruments have emerged as important FinTech tools in the post-pandemic world. Marqeta 2022 State of Credit Report has found an inflated cost of living is a worrisome development in that US. The recent developments are heavily weighing down on the consumers even as new lending options such as credit card and Buy Now Pay Later (BNPL) services provide important financial support for many users.

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Source: Marqeta State of Credit 2022

A majority of the US consumers are applying for credit cards and BNPL facilities to make their ends. According to a recent Fintech consumer report, the volume of users relying on credit cards and BNPL have increased significantly in the last 12 months. Despite struggling with credit card payments, users are continuing with their dependence on credit cards and Buy Now Pay Later services to combat rising inflation in the cost of living in the US.

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FinTech analysts reviewed the report and came up with the following insights:

Post-pandemic Financial Chaos and the Price of Inflation Hurting Citizens

Delayed purchases due to pandemic in 2021 and looming inflation in 2022 are hurting average US households. Marqeta’s latest report on credit services market is a remarkable analysis of the post-pandemic economic situation and how financial tools like credit cards and BNPL services are proving to be a savior for most US families during financial crisis. With ease in lockdowns and the economy slowly getting back to normalcy, US citizens are facing a new kind of challenge in their financial well-being. With interest rates going up and looming inflation, a majority of the US citizens were finding it hard to meet their ends. 4 out of 10 credit card users failed to pay their dues on time in the last 12 months.

According to Marqeta, the dueling anxieties of cost of living increases and rising interest rates are weighing heavily on consumers, and the quickly evolving credit card and BNPL markets are becoming increasingly important to their financial well-being. The company released its 2022 State of Credit report which surveyed 4,000 consumers globally – including 2,000 in the United States – highlighting consumer sentiment around spending trends, alongside consumer credit experiences and preferences.

Compared to 2021, in 2021 there is a 37% rise in the population of people who struggled to pay their credit card payments. Users in the UK (29%) and Australia (31%) were slightly better poised when it came to dealing with financial anxieties that rose out of missed payments.

Consumers are Availing New-age Credit Options for their Financial Well-being

With rapid growth in adoption rates during the pandemic, Buy Now, Pay Later services made another significant leap in Marqeta’s 2022 survey, showing off continued consumer fascination and engagement with this new lending vertical. More than two-thirds (67%) of US consumers surveyed in 2022 said that they had used a BNPL service, up from 44% in 2021. The BNPL sector remained buoyed by existing tailwinds, while also set to benefit from consumer anxieties around cost of living and interest rate increases.

  • 44% of US consumers surveyed reported struggling with their minimum credit card payments in 2022, up 47% from Marqeta’s 2021 survey.
  • Two-thirds of US consumers surveyed said that they’d relied on credit cards to make ends meet in the last 12 months.
  • The use of Buy Now, Pay Later services among US consumers surveyed rose 43% year-over-year, jumping from 47% to 67%.
  • Almost two-thirds of BNPL users surveyed (64%) said their BNPL use had increased in the last 12 months.
  • Forty-seven percent of people surveyed said they would be interested in accessing other financial services through their BNPL provider.
  • Almost half (49%) of all consumers surveyed said that interest rate increases were making lower-cost BNPL interest rates more attractive, while 46% of respondents said that they had used BNPL to make ends meet given cost of living concerns.
  • More than 1-in-3 people (35%) surveyed said they now use BNPL more than credit cards.

In the US, the Number of Active Credit Cards Outnumber US Population

Credit cards and BNPL services are very popular among US citizens in the age group of 18 and 25 years. In fact, the US is ahead of the UK and Australia when we compare the number of active credit cards versus total population. As per Marqeta, there are ~360 million active credit cards versus 332 million US citizens.

Cash flow, Credit Insights and Real-time Advises on Financial Well-being: Top Demands from Every Credit card and BNPL Service User

According to Marqeta’s report, users not only see credit card facilities as a means to meet their daily requirements but also hope their service providers are able to go a notch  higher and offer something that would ease how users deal with financial crisis. Users expect to see more flexible credit options with fluid cash flow while lowering their spending in unnecessary purchases. They demand more insight into spending, and possible advises on how to use credit card and BNPL services more intelligently to reduce financial anxieties.

Despite cost of living and interest rate fears, reported credit use among survey respondents remained high. The number of consumers surveyed globally with more than one credit card rose 19% in 2022 (from 52% to 62%). Showing off the benefit of being top of wallet, 87% of consumers surveyed globally said that they had one credit card they used more than any other, and 58% of respondents reported having other financial products with their main credit card provider. Despite this, credit card consumers remain malleable and are shopping for better options: 42% of US consumers surveyed planned to apply for a new credit card in the next 12 months, with 39% of respondents reporting having stopped using a card in that same period. Unsurprisingly, with credit engagement so high, US consumers had a laser focus on their credit score, and 68% of those surveyed said they were focused on building their credit, with 60% of respondents citing concerns about the impact on their credit score of applying for new cards.

“Our 2022 State of Credit report shows that consumers globally haven’t had a break, going from pandemic concerns into fears around rising inflation and the specter of looming interest rate increases. And it’s wearing on them,” said Rachel Huber, Market Intelligence Lead at Marqeta.

Rachel added, “Against this backdrop, credit is becoming a more important part of their financial lives. But with evolving needs and a rise in new credit options and alternatives hitting the market, financial institutions and fintechs alike cannot take their customers for granted.”

[To share your insights with us, please write to sghosh@martechseries.com]

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