Payix White Paper: Smartphone Dependence

Chris Chestnut and Preston Cecil


The telephone has been called one of the five most important inventions of all time ( And no single version of the telephone has ever impacted the way we live more than the smartphone.

In Time magazine (June 22, 2012), author Dan Kadlec reviewed several relevant studies and concluded, “There is no denying that smart phones are changing the way we work, play and manage our money.” Yet, even with the many advantages that have come from this new technology, there have also been some clear disadvantages. Texting while driving to name one. Or trying to have a face-to-face conversation with a teenager – almost impossible! Negatives aside, though, indisputably one of the biggest advantages of having smartphone technology has been its ability to provide internet access to the majority of the U.S. population. That’s important because according to a 2015 Pew Research Center study, almost 20 percent of people today have no regular way of accessing the internet — other than via their smartphone.

While this is good news for most of us, though, this newfound, widespread access has now resulted in a new phenomenon called “smartphone dependence.” The 2015 Pew study suggested there are two distinct population segments primarily affected by smartphone dependence: younger adults (millennials), and people with low income. Further investigation points to three reasons for millennial smartphone dependence:

  • They don’t know any different. Millennials have grown up in a world in which just about anything worth doing is done on a computer. Smartphone technology is just the next step in what seems to be natural evolution for these 18-34 year olds.
  • They’d rather not talk. Young people today seem glued to a 3×5 screen just about all the time! Although the ratio of extroverts to introverts probably hasn’t changed, a 2011 Pew Research Center study found that younger people in general have adopted a text over talk mentality. It said they average about 88 text messages per day versus an average of 17 voice calls.
  • It’s convenient. Millennials are a “mobile-first generation” (according to MarTech Advisor, Oct. 10, 2016), and to accommodate this publishers have recently intensified their transition to mobile content. For millennials, being handcuffed to a PC or tied down by a land-line is an unnecessary inconvenience that’s only faced by people who are “over the hill.”

There are also three additional reasons for smartphone dependence that standout for lower income borrowers:

  • It’s the best choice. People living month-to-month on a low income finally have an affordable and convenient way to access the “internet of things.” According to Pew research done in 2014, more than 75% of monthly data plans now cost less than $100 per month. Additionally, market competition has driven average smartphone prices down in recent years, which provides access for this demographic group that was considered out-of-reach not too long ago. Now, that access is an essential part of day-to-day life.
  • It’s the new home phone. Cell tower coverage and carrier reliability has reached a point where, according to the National Center for Health Statistics (NCHS), almost half of American households have abandoned what was once considered a must – a home phone. Many argue a home phone today is a superfluous item for the wealthy or those on the technology fringes.
  • They have limited options. Although higher-income consumers often have access to PCs at work, school, or home, lower-income individuals are more likely to have jobs that either don’t require direct access to a computer or limit their discretionary online access. That leaves a smartphone device as the best or even only option to get online.

Thus, while Pew suggests both millennials and low-income individuals are smartphone dependent, it’s clear the reasons behind their dependency are very different. At a high level, it almost seems that millennials were destined to be smartphone dependent, whereas people with low income might have become smartphone dependent out of sheer necessity – aided by technology saturation, marketing from phone carriers, and cultural shifts.

Technology advancements over the past decade have meaningfully changed most people’s perceptions of what constitutes a “personal computer.” Simply put, today’s smartphones are yesterday’s personal computers for just about everyone. Since Apple introduced the first iPhone in 2007, the Pew Research Center says smartphone ownership has increased to just about 70% of all Americans. Today, smartphones are empowering people to engage in communication and transactional activities like never before. Users are “tweeting” hundreds of “followers” simultaneously; transmitting money from one person to another with the push of a button; and searching for a job while riding in the backseat of a car. These actions can now all be done in the palm of your hand easily and instantly with a smartphone. However, while this technology shift has impacted people of all socioeconomic groups, it appears to affect lower socioeconomic status individuals in a more profound way than others because access to what was once viewed as a luxury item has become commonplace due to technology saturation over the past decade.

As the smartphone market began to take off between 2009 and 2011 – largely due to competition between Apple, Google and Samsung (among others) – companies like Boost, Metro PCS and Cricket scrambled to meet demand from a new and potentially very profitable market: lower income individuals. These companies developed smartphone financing options and month-to-month data plans, which created a quick payback period for low-income individuals typically with sub-prime or deep sub-prime credit ratings. It’s easy to imagine the Risk Management departments within these companies finding a price at which the default rate on smartphones would be offset by a good payment history; that is to say, these companies found a way to open up smartphone ownership to lower-income people with bad credit while still making a profit. Marketing of these products to low-income, sub-prime individuals was pervasive, and consequently it put a smartphone in the majority of people’s hands by 2013.

The cultural implications of the smartphone revolution have been widespread. Almost everyone has a smartphone now, and as discussed previously, many low-income, sub-prime individuals are now smartphone dependent. So as consumers, they have now essentially become Smartphone Dependent Borrowers ™. These borrowers almost exclusively use smartphone devices to communicate with everyone, whether it’s over the phone, by email, via text message, or online. Understanding this, sub-prime or deep sub-prime lenders would be wise to invest in technology solutions that meet the people in this new demographic group where they are – on their smartphones.

For example, imagine a native smartphone application (an application that’s integrated with the phone’s operating system) that allows lenders to “wake up” borrower’s smartphones to communicate timely and relevant instructions. Or consider having the ability to collect a payment or promise-to-pay directly from a Smartphone Dependent Borrower’s ™ phone while at the same time setting payment limits or scheduling constraints. By servicing borrowers entirely through their smartphones, lenders can be more efficient, effective and successful in reaching and conducting business with their customers no matter where they are or what they’re doing.

Changes in technology and culture over the last decade have created a new type of borrower: a Smartphone Dependent Borrower ™. These borrowers don’t necessarily require a new servicing strategy; however, with almost all communication originating from a mobile smartphone device, it seems clear that smart lenders are investing in smartphone technology solutions to keep up with today’s consumers.

Authors Chris Chestnut and Preston Cecil are two of the founders of Payix Inc. Payix provides collections tools, payment processing resources and business intelligence solutions to the nation’s lenders and auto dealers. Offering white-label services and real-time loan management system (LMS) integration, the fintech firm helps its clients connect with their borrowers and improve their ability to collect payments. Payix was founded in 2016 and is based in Fort Worth, Texas. For more information, visit

Chris Chestnut and Preston Cecil