For all the rapturous reports we read these days about the economic recovery, the fact remains that more than half of American households are currently living paycheck to paycheck — including many that earn more than $100,000 per year. Although recent PYMNTS data reveals a wide discrepancy between different regions, the basic underlying problem is the same — and the most common solutions used to mitigate it involve new digital technologies.
Read more: New PYMNTS Data Show Sharp Regional Variations In Disposable Income
For example, bridge millennials — the 33- to 43-year-old consumers born between 1978 and 1988 — find themselves in challenging financial positions as they enter their peak spending years while shouldering student loans, paying sizable mortgages and often supporting children. It’s a situation that leaves nearly a third of this generation (29 percent) strapped at the end of the week or month, and living paycheck to paycheck.
That problem, according to the data, arises somewhat regionally — younger consumers in the Northeast who contend with high living costs are 20 percent more likely to be living paycheck to paycheck than those in the Mountain states, where the cost of living is lower.
Moreover, the study found, the paycheck-to-paycheck problem isn’t a generational phenomenon — almost 59 percent of South Central consumers live paycheck to paycheck, and 56 percent of Northeast consumers report the same condition. Urban consumers, the data shows, live paycheck to paycheck roughly 63 percent of the time, while 51 percent of rural consumers say the same.
In fact, PYMNTS/Mastercard data from earlier this year reveals how consumers’ work also has a big effect on outcomes. Among gig workers, 71.5 percent of workers report being “payday expectant” or “payday-centric.” Expectant workers report that they have some savings for emergencies, but that their paychecks are consumed by everyday expenses, while the “payday-centric” workers do not have savings at all, but are at least able to meet expenses so long as they get paid.
See also: 16 Pct Of Gig Workers Live Paycheck To Paycheck With No Savings
But as PYMNTS data also demonstrates, consumers living with the paycheck-to-paycheck problems of instability and uncertainty in their financial lives are looking for solutions to both close the gap and better manage their money to beat back the issues they face.
Looking To Inject Some Speed Into The Process
Instant payroll has become an increasingly desired offering among workers who argue that the two-week payroll is a relic of the past, and no longer relevant in the context of modern payments. That shifting payment preference is particularly observable in the gig worker segment.
According to the PYMNTS/Mastercard data, getting paid faster is of interest to more than 84 percent of workers living paycheck to paycheck and 66 percent of those who are not. In fact, the idea is so compelling to the former that more than one-third would consider switching to gig platforms that offered them. Among paycheck-to-paycheck workers with no savings for emergencies, 53.4 percent said they would use pay advances to cover bills and expenses. However, the research also demonstrates that 50.8 percent of paycheck-dependent gig workers believe that an advanced payment option would reduce money-related stress, while approximately 40 percent stated that it could help cover the cost of work-related supplies.
Speed of payment isn’t the only ramp-up workers are seeking. They are also increasingly looking for better bill pay options, with an eye toward expedience and immediacy. Specifically, they want the ability to head to a single portal that helps them “understand [their] whole financial situation, not just how to pay a particular bill,” BillGO SVP Russ Chacon told PYMNTS in a recent discussion.
You may also like: Turning Bill Pay From Inefficient Time-Waster To Engaging Service
“Providing a more engaging, complete bill pay experience directly contributes to all of those things,” Chacon noted. “Everyone realizes that it’s critical in helping the bank or the FinTech grow that consumer relationship and the revenue associated with it. Sitting still is not an option.”
Rethinking Financial Wellness
Financially pressed younger consumers who are living paycheck to paycheck are increasingly looking to better control their spending to avoid building debt, PYMNTS data also demonstrated earlier this month. Credit cards are becoming less attractive, as the bonus of expanding one’s spending power is increasingly balanced by fears of falling into a hard-to-exit debt trap — even among consumers who are otherwise “worry-free” when it comes to meeting their financial obligations.
Related news: Report: Financially Underserved Consumers 3X More Likely To Use BNPL Options At Checkout
According to PYMNTS data, 64 percent of consumers who mostly prefer one leading BNPL program believe that BNPL providers are more trustworthy service providers than banks or credit card companies. Overall, 48 percent of BNPL users agreed with the statement that “BNPL providers are more trusted service providers than banks or credit card companies.”
Consumers, even the increasing share across the U.S. feeling the pull of paycheck-to-paycheck lives, aren’t quite willing to resign themselves to the problem — and are increasingly looking for technologies to give them control of when they are paid and how they pay out.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More