Recession-wary consumers are changing their financial habits

The fintech consumer is changing

While the debate rages over whether we’re in an economic downturn, recession or vibecession, one thing has been pretty clear: “Across the board, consumers are worse off than they were last year,” said Charlotte Principato, financial services. analyst at Morning Consult.

And that sentiment affects the financial products people are interested in using, as detailed in Morning Consult’s recent “State of Consumer Banking & Payments” report, based on monthly surveys of more than 2,000 consumers.

People are more likely to say they are worried about running out of money, or not achieving the lifestyle they want because of money.

• The financial well-being score for US consumers – a reflection of their perceived financial security, among other factors – showed declines across all income groups compared to June 2022 to June 2021.
• About 53% of American adults said they have money to spare each month in June, compared to 61% at the same time last year.
• About 13% fewer adults now say they are making progress toward financial goals of saving for education and donating to charity.

Investment is cut. Especially by young adults. The number of Millennials who say they have at least one savings product fell from 70% in July 2021 to 57% in June; only 49% of Gen Z adults have at least one investment product, compared to 60% last year.

• “We compare this to what was still the height of the retail investment boom,” Principato said. “But it seems we’re on a reversal trajectory to the pre-pandemic world, when people didn’t have the time or money to invest.”
• That’s a big part of what cuts into Robinhood’s revenue. “Clients see this high inflation, along with high interest rates, bear markets [in] stocks and a crypto winter,” CEO Vlad Tenev told analysts earlier this month. “And all of this leaves less money to spend and therefore less to save and invest.”
• It also makes for a less diverse base of investors. “The demographic makeup of individual investors — already disproportionately older and wealthier than the general population — is even older and wealthier than it was in July 2021,” Principato wrote in the report.
• Perhaps surprisingly, the number of US adults who said they hold crypto held steady from January to June at around 15%. That despite a crash in values.

Younger consumers still buy now, pay later. Just under 40% of Gen Z adults and 30% of Millennials surveyed by Morning Consult used “buy now, pay later” to make at least one purchase in the past month as of June.

• “I think consumers who have gotten into the habit of using it over the past year will continue to do so in the coming months, especially as we get to the holiday season,” Principato said. Morning Consult began surveying the use of “buy now, pay later” last July and found that reported monthly use peaked in December at about 25% of the US adult population.
• There’s an age gap: Fewer than 10% of Baby Boomer customers reported using a pay-later service in June.
• Credit card use is holding steady compared to last summer, Morning Consult found, while fewer households report having car and home equity loans.

People stay the course with their bank. The number of people who told Morning Consult they were interested in adding a new banking provider fell 39% in June compared to last year. “People are focused on not rocking the boat any further than it’s already being rocked for them,” Principato said. That could be bad news for neobanks that are already struggling to make a profit.

– Ryan Deffenbaugh (e-mail | twitter)

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