How to Drive Engagement When Consumers Refuse to Change

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Research Shows Consumers are Creatures of Habit on Bill Pay, Direct Deposit, and More 

Read any headline about the state of consumer finances, housing prices, inflation, etc. and you quickly walk away stressed or depressed. Money remains the top source of stress for consumers. And, we know consumers want financial services providers to do more to support them. 

However, MX found that 1 in 4 consumers feel completely financially secure today. And, more than half (56%) of respondents say they will be financially secure someday. This paints an optimistic picture for consumers. And, among younger generations, the optimism is even higher. 

Gen Z Optimistic About Financial Security

But, it’s not all sunshine and rainbows. While consumers may feel optimistic for the future, they are still worried about today as the everyday costs of groceries, housing, and more continue to rise due to inflation. And, they may be stuck in old ways when it comes to solving these feelings of financial insecurity. 

In addition, nearly 1 in 10 (8%) of respondents say the top factor contributing to their feeling of financial insecurity is low or no access to resources to support them. There is an opportunity for financial services providers to play a bigger role in helping consumers achieve financial security. In fact, 30% of consumers agree they feel financial providers don’t do enough to support their financial needs. This jumps even higher for Millennials (45%) and Gen Z (35%) respondents. 

Consumers Don't Feel Providers Do Enough

Let’s break this down even further. Our latest survey of more than 1,000 U.S. adults dives into how consumers define living paycheck to paycheck, how they pay bills, how they use credit cards and direct deposits, and personalization expectations. 

Working 9 to 5: How Consumers Define Living Paycheck to Paycheck 

According to industry terms, living "paycheck to paycheck” means an individual would be unable to meet financial obligations if they were unemployed. Other definitions say it means spending all of your income on monthly living expenses – like rent or mortgage, utilities, groceries and transportation – with little to no money left over each month. 

But, financial obligations and living expenses are subjective. A recent survey from PYMNTS found that “nearly half of consumers earning north of $100,000 annually say they are living paycheck to paycheck.” That seems hard to follow. So what does this term really mean? We asked consumers: 

Defining Living Paycheck to Paycheck

It’s clear there is no single definition for living paycheck to paycheck — and only 21% of consumers said it meant being unable to pay their monthly bills without that next paycheck. More often, it’s about being able to add to (or build) savings and funds for retirement. 

So how many consumers are actually living paycheck to paycheck according to these definitions? Here’s what we found: 

Living Paycheck to Paycheck2

It’s no surprise that higher income households are significantly less likely to say they are living paycheck to paycheck. However, our research also found that income levels can shape how individuals approach paying bills on a monthly basis. In short, higher incomes may often mean higher levels of trust and use of automatic payment options. But, we also found that many consumers still prefer manual methods as a way to keep track of their finances. 

Paying the Bills: What Consumers Prefer

When asked what most closely aligns with how they pay bills on a monthly basis, 40% of all respondents say they prefer to manually view and pay each bill every month to keep track of their finances. Another 24% of consumers manually pay each bill so that they can make sure they have the funds available. 

Consumers Manually Pay Bills

Taken together, this means nearly two-thirds of consumers still pay their bills manually each month. This presents a potential opportunity for financial services providers to lessen the manual burden for consumers who want to keep close track of their finances by offering personalized alerts and notifications for bill pay. 

On the other hand, 36% of respondents say they set up automatic payments with each provider. Among higher income households, this rises to nearly half (48%) for those who earn more than $100,000 annually — compared to 31% of those who earn less than $50,000 annually. 

Younger generations are also more likely to leverage automatic payments. Forty-two percent of Gen Z and 41% of Millennials set up automatic payments with each provider, while only 29% of Gen X and Baby Boomers do this. 

What types of payments are they using? Top preferred payment options when paying bills are: 

Preferred Bill Pay Methods

Of those who use a few different cards, it’s all about the rewards for the majority — 33% do this to maximize points or rewards on multiple cards and 28% do so to earn the most cash back for different bills with different cards. Only 29% say they use multiple cards to ensure they can pay each bill. 

As financial providers look to attract new credit card users, does this mean incentives can drive consumers to switch how they pay their bills? Maybe… 

Security (27%) and convenience (22%) are the most important factors for consumers when considering their bill payment methods. But, 11% say the ability to earn rewards or points is most important. And, when asked about their view on switching how they pay bills, more than one-third (36%) said they would consider switching if they received an incentive. 

However, the majority (51%) said they prefer to keep their payment methods the same for convenience. And, when asked about the times they’ve switched how they pay a bill, 36% say they have never done this. Of those who have switched their payment method, 15% said they switched to earn better rewards or points. 

Reasons to Switch Bill Pay

Charging It: Consumer Attitudes on Credit Cards

Beyond paying the bills, we also explored how consumers think about credit cards in general. While many industry reports show credit card usage is increasing, our research tells a different story. According to the survey, 1 in 4 U.S. consumers don’t have a credit card. This is a significant increase from 12 months ago when only 17% said they did not have a credit card. 

Here’s how consumers use credit cards today: 

Credit Card Use

Money in the Bank: Current State of Direct Deposits

For most, paper checks are a thing of the past and getting paid is mainly done through direct deposit (i.e., depositing funds electronically into a bank account rather than through a physical, paper check). In fact, the ACH Network reports it transferred more than 8 billion direct deposits in 2023 — more than $14.5 trillion across corporate payrolls to Social Security, tax refunds, and retirement distributions. 

For most consumers, direct deposit is a “set it and forget it” exercise. When asked if they have ever switched their direct deposit to a different financial institution, the majority (65%) say no. And, for those who have switched, the rationale is somewhat obvious — they closed their previous account (40%) or had an opportunity to earn better returns (30% switched to earn higher interest rates) or rewards (17% received an incentive to switch). 

Consumers Never Switch Direct Deposit

Consumers also like to keep it simple. When it comes to managing direct deposits, 67% said they deposit the entire amount into one account. 

That said, interestingly, there are small subsets who split their direct deposit into multiple accounts or even multiple financial institutions. Seventeen percent are splitting up their direct deposit into multiple accounts within the same institution while 7% are splitting it across multiple institutions. While we didn’t dive into the reasons why consumers split up a direct deposit, it’s likely tied to how consumers like to monitor and manage their finances. 

In the same way that financial providers have an opportunity to lessen the burden for consumers when paying bills, automated insights and notifications about consumer spending and saving could help them decide how best to split up their paycheck across accounts. 

Looking to grow deposits and encourage consumers to switch to your institution? Incentives are the key. Among those who say they have not switched a direct deposit to another financial institutions, top factors that are most likely to make them switch include: 

Factors to Drive Direct Deposit Switching

In addition, there is still a small portion of consumers (9%) who don’t use direct deposit at all. This is another opportunity for financial institutions looking to attract new customers and grow deposits. 

A Need for Personalization: Providers Ahead of Consumer Expectations?

MX’s research highlights a potential disconnect in how financial providers engage with consumers and how consumers feel today. Simply put, financial institutions may be ahead of consumers in terms of the importance they place on making sense of a disconnected financial picture and delivering personalization at scale to meet consumer needs. 

Case in point: a commissioned survey of 150 financial services industry leaders and decision makers in the U.S. and Canada by Forrester Consulting found that 57% of financial leaders agreed that consumers today have money in more places than ever before, and as a result, often don’t have a holistic view of their financial lives. But, when we asked the same question of consumers, only 14% of U.S. consumers agreed with this today. So, are consumers behind or is something else going on? 

We know from our previous research, and other industry research, that the average consumer has at least 5 to 7 different financial accounts with various providers. So maybe it comes down to the word “money” in the question above and how consumers think about their finances? As we said earlier, the majority of consumers put the full amount of their direct deposit into one account. That’s the money piece of the puzzle — one deposit account. And, that’s likely what consumers thought about in the question above. But, the finances piece — credit cards, savings accounts, loans, retirement, etc. — is much more complex. Financial services providers can help consumers bring together all the pieces.

To do this, we believe the answer lies in financial data intelligence — making financial data actionable to increase engagement and loyalty, improve results, and drive growth. Here’s why: 

Personalization Stats

The expectation for personalization is clear from these consumer responses. But delivering on personalization expectations with actionable insights is still challenging. Let’s look at marketing as one example. 

Most consumers say they receive marketing emails or direct mail from financial institutions at least once a month (23%) or more often (27%). But, while consumers generally say these messages are often (36%) or sometimes (42%) relevant to them, most messages aren’t driving any action by consumers. Sixty-seven percent of consumers said no when asked if they have ever taken an action based on a marketing email or direct mail from a financial institution. 

Consumers Not Taking Action on Marketing

Financial providers need to deliver personalized money experiences that help consumers connect to, understand, and act on their financial data. 

As it becomes easier for consumers to open new accounts or switch financial providers if they aren’t satisfied, delivering a personalized money experience is more critical than ever. Forrester found that the vast majority (81%) agree being able to personalize experiences based on consumer financial data is a must-have for the future. Amidst fierce competition for share of wallet and mind, financial providers can’t afford to ignore what they know about their consumers. Opportunity And Growth In Financial Services: Turning Data Insights into Actionable Intelligence

About the Survey

This survey of 1,059 American adults was conducted by MX in Q1 2024 using an online survey platform. Results included an even split in responses across each generation (Gen Z, Millennials, Gen X, Baby Boomers) based on birth year, as well as gender (Note: nonbinary respondent sample size too small to calculate) and ethnicities (White and non-White [Asian, Black, Hispanic, Other]). Household income comparisons were calculated based on the following annual household income responses: 

  • Low household income = Less than $50K annually
  • Middle class = Between $50-$100K annually
  • High household income = More than $100K annually