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Proceed with caution: Fintech credit and financial instability
People who use fintech credit products like Cash Advance, Earned Wage Advance, and Buy Now, Pay Later are often already facing financial hardship. Members tend to turn to them to cover basic expenses.
Short-term relief, long-term risk: The real impact of fintech credit on struggling households
SaverLife is grateful for the support of the Gates Foundation for making this research possible. This is the second in a two-part research series examining how financial technology impacts the financial health of low- to moderate-income households.
This research brief reveals a critical insight: people who use fintech credit products like Cash Advance, Earned Wage Advance (EWA), and Buy Now, Pay Later (BNPL) are often already facing financial hardship. Members turn to these tools not for convenience, but because they lack the cash or savings to cover basic expenses. While these products offer short-term relief, they can also trigger long-term challenges—from debt stacking to unpredictable cash flow and missed bill payments.
Through survey data, transaction analysis, and member interviews, this report explores how fintech credit can both reflect and reinforce financial instability. Nearly two-thirds of BNPL users reported problems such as overspending, while Cash Advance and EWA users were far more likely to also rely on payday loans. As reliance on these tools grows, this brief raises important questions about how fintech can better support—not harm—those working hardest to get ahead.
The hidden costs of fintech credit
In this research brief, we uncover the real impact of fintech credit. The findings are clear: these products often signal deeper financial distress rather than providing a pathway to stability.
What we found: Key findings
Even after accounting for income and other factors, fintech credit users—particularly those using Cash Advance and Earned Wage Advance (EWA)—are more likely to experience financial hardship than non-users. While our research doesn’t necessarily indicate that these products cause financial struggles in and of themselves, it does show that people already in financially precarious situations are more likely to rely on them to make ends meet.
A large percentage of fintech credit users experience income volatility or unexpected expenses in the months before using these products. For example, Cash Advance use spikes following months of high financial stress. This suggests that these loans are primarily used to cover past financial gaps rather than prevent future ones, reinforcing cycles of financial instability.
Many users don’t just rely on a single credit product—they stack multiple forms of credit, including fintech credit, mainstream credit (credit cards), and high-cost credit (auto-title or payday loans). This suggests that fintech credit isn’t replacing high-cost borrowing; it’s adding to it, making it even harder for consumers to keep up with payments and avoid financial strain.
Fintech credit users report significantly more debt-related problems and difficulty making payments on credit cards, loans, and other financial obligations. On average, users of fintech credit products are more than twice as likely to be behind on debt payments and nearly twice as likely to have debt in collections.
Members who use fintech credit products are significantly more likely to incur overdrafts in the following months, highlighting ongoing cash shortfalls. Despite being marketed as tools for financial flexibility, these products do not reduce overdrafts—instead, users experience an increase, suggesting they may contribute to financial strain rather than alleviate it.
Rather than acting as a financial bridge, these products often signal deeper financial challenges. Users are more likely to experience food and housing insecurity, use multiple credit products, and experience difficulty managing high levels of debt.
