The digital economy reveals new financial challenges for younger consumers

While these flexible payment options are popular with consumers, Intrum’s research shows they are making it hard for some people to keep track.

Consumers struggling to stay within their budgets report difficulties with ‘subscription creep’. The rise of the subscription economy, means customers can easily sign up for goods and services online, with payment taken automatically on a monthly or annual basis, sometimes after a free or reduced payment trial period. More than half of UK consumers (53 per cent) agreed they are surprised to see how much their subscriptions can accumulate without their noticing.

At the same time, a quarter (24 per cent) admit that they find it difficult to keep track of the buy-now/pay-later (BNPL) purchases that they make during an ordinary month. This method of payment has been growing in popularity in recent years, with many retailers offering BNPL services to their customers.

Generational effect

Research shows that it is predominantly younger consumers – Gen Z and Millennials – who find themselves caught out by their commitments to subscription services. Gen Z are also the most likely to say they find it difficult to keep track of their BNPL purchases. This corresponds to our data that Gen Z respondents are significantly less likely to describe themselves as strong at tracking what they are spending their money on – 50 per cent vs. 54 per cent and 70 per cent among Gen X and Boomers, respectively.

It’s not surprising that younger consumers are struggling more with these payments. They are digitally-savvy and likely to take advantage of subscription and BNPL options but also likely to be on lower incomes as they are early on in their careers. It’s important that financial education keeps up with the pace of change in payments so we can reap the benefits of these options while not getting into problem debt.

Greedflation turning off consumers

While consumers are concerned about subscription creep, they are clear how important flexibility is, with half (49%) more likely to spend money with businesses offering flexibility on payment terms and 65% believing it is socially responsible for businesses to offer these options in a downturn.

However, consumers say they are wary about firms hiking prices unnecessarily. So-called ‘greedflation’, where businesses raise prices too much or fail to bring prices back down when costs fall, is a real turn off. In fact, three-quarters of UK consumers say they would stop spending money with a business if they thought it was engaging in this practice.

Businesses who demonstrate a commitment to Consumer Duty, ethical practices and appropriately support customers with their needs and expectations should benefit from that stance.

Today’s consumer is alert to ethical issues as well as financial. Businesses that take this on board will see benefits in the long-term.