The Europeans are more calmly about paying short-term debts on time, but at the cost of more credits

LoansHouseholds in Europe are paying their debt and bills more calmly, but they face new challenges, and artificial intelligence (AI) is making permanent inroads into payments, according to the European Consumer Payment Report (ECPR) for 2024. The report covers a survey among 20 thousand adult Europeans in 20 countries on the continent.

The cost of living has eased slightly over the past year, and as of September annual inflation in the euro area and the UK was below 2% – significantly lower than the double-digit figures two years earlier. The cost of debt has also started to fall in several countries as the ECB continues to cut interest rates.

In 2024 the share of people who paid all their bills on time rose to 74%. A year earlier only 63% managed to pay their bills on time. The biggest sureness in their ability to pay on time, and the biggest growth compared to 2023, is among people in Spain and Poland – 89% and 82% respectively (see the chart). Italy and Ireland are very close to this share, and a strong deterioration of this indicator shows the Netherlands, Slovakia, Sweden, Switzerland and Austria. Austrians, along with the Swiss and Greeks, are among the people who most doubt their ability to pay on time.

 

According to the ECPR, a significant proportion of consumers use short-term debt to pay their bills immediately. This creates new challenges in a period of relatively high interest rates, the authors of the report note. Around 37% of people say they borrow or use credit to pay their bills, with this proportion jumping to 60% in wealthier countries such as Austria and Switzerland. In 2023 only 25% of Europeans paid their bills on credit, and in the past five years this share never exceeded 27%. Greece still has the highest proportion of people in debt, followed by Finland, Portugal and Hungary.

The good news from the survey is that the proportion of people who fail to pay on time due to lack of funds has fallen sharply, from 43% to 29% last year. A major reason for the delay is now the fact that consumers forget about their obligation. A full 57% say they may pay late if they receive a paper invoice by the post-office. In addition, for 70%, the inconvenient online interface is an obstacle to paying debts, and even more are those who would delay payment, if the creditor sent them an aggressive message.

The data shows that people prefer to talk to a chatbot about their duties instead of a real person – on average 25% of Europeans prefer this way of communication. In individual countries, their share varies from 36% in Switzerland to 18% in Spain. Contrary to concerns about the financial habits of the young, only a quarter of Generation Z have delayed paying at least one bill in the past 12 months, and only the baby boomers are better off on this score. The largest share of those who are late and use credit to cover obligations is among the “millennials” generation.

The culture of “take-now, pay-later” is most prevalent in Switzerland and Norway, according to ECPR data. The Czech Republic and Hungary have the least tendency to such benefits.

Consumers in Spain, Portugal, France and the Czech Republic have an “excellent” evaluation in payment of their bills and obligations on time. Spain also performs very well in another indicator – there is the largest share of households that can meet an extraordinary expense of 200 euros without having to go into debt. Other countries with a high proportion of emergency preparedness include Italy, Ireland, Germany and Great Britain.

According to the ECPR, however, Europeans are still uncertain about their financial prospects. They are more likely to feel confident in short-term bill paying than in their ability to plan for the future and improve the conditions around them. Only four in ten respondents believe they can set aside enough for a comfortable retirement, and even fewer say they are in a position to invest in their future. However, almost one-third hope that they will find a better-paying job or source of income in the future. 

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