In researching PYMNTS Intelligence’s “Meeting the Demand for Instant Ad Hoc Payments,” a collaboration with Ingo Payments, we found the volume of instant, nonrecurring ad hoc payments has risen 28% since September 2023.
This surge in instant ad hoc payments can be traced, in part, to the rise of gig economy workers and gamers, both of whom prefer to receive their funds instantly. But our data also showed that enterprise organizations were also leveraging instant payment options to make payments to their vendors and freelancers, indicating that they, too, recognized the speed and efficiency instant payments can bring to the accounts payable (AP) desk.
Further evidence of this transformation was revealed in additional data that PYMNTS Intelligence collected but didn’t release in the final report.
This exclusive data showed that the share of consumers who are bypassing traditional financial institutions (FIs) in favor of non-bank financial service providers is on the rise, and high-income earners and millennials are leading the charge.
As the chart illustrates — as of January — on average nearly 36% of U.S. consumers used these non-bank FIs, which is a bump over the 33% who did so one year earlier.
Perhaps not surprisingly, baby boomers and seniors were the most reluctant to break free of traditional banking swim lanes: Only about 28% of them used non-bank financial service providers in 2023. Millennials were far less reluctant, with 44% of them using non-bank FIs, while 43% of bridge millennials were right behind them.
How much consumers earn also appears to influence their willingness to make the non-bank leap. Where 31% of consumers earning less than $50,000 annually used a non-bank FI in 2023, 37% of those earning more than $100,000 annually explored alternative financial services providers.
PYMNTS Intelligence also researched how many consumers treated non-bank financial service providers as their primary FI in 2023. Once again, baby boomers and seniors showed the most hesitancy, with only about 6% opting to use non-banks as their main FI. Nearly 21% of millennials, meanwhile, took the plunge. Annual incomes again factored into the decision, with 14% of high earners (those making $100,000 or more annually) using non-banks as their main FI, while only 13% of low-income consumers doing the same.
Interestingly, the percentages of low-income (those earning less than $50,000 annually) and middle-income (those earning $50,000 to $100,000 annually) consumers that made non-banks their primary FIs fell slightly in 2023 compared to the previous year. This might be indicative of general economic unease, or it might reflect a trend where consumers retreated back to traditional FDIC-insured institutions following three high-profile bank failures in early 2023.