The news: A PYMNTS Intelligence report emphasized that subprime consumers (credit score between 300 and 619) are a large, stable, and underserved market representing 17% of US consumers, or about 44 million adults. And banks are losing share of this group, because these consumers are increasingly turning to alternative providers when traditional credit products fail to meet their cash-flow realities.

Zoom in: PYMNTS data shows the subprime population has remained remarkably consistent for 47 consecutive months, making it an enduring customer base rather than a cyclical credit problem. Yet traditional issuers often view this group as an underwriting risk instead of a relationship opportunity. 

Banks are overlooking a segment larger than many major card portfolios while competitors are actively building products around their needs. Thirty-five percent of subprime consumers don’t have any credit or store cards, and some have shifted entirely to buy now, pay later (BNPL) products instead of traditional credit cards. Indeed, they use BNPL at a higher rate than the general population (19% versus 13%).

Why this matters: Banks risk ceding an entire customer segment to competitors by focusing solely on credit risk rather than customer lifetime value. Subprime consumers are actively seeking financial solutions. And institutions that design products around cash-flow volatility, smaller credit lines, point-of-sale financing, and alternative underwriting signals can build long-term relationships with millions of consumers. 

But banks that continue to ignore this segment are effectively allowing fintechs, BNPL providers, and specialty lenders to become the primary financial partners for one in six US consumers. This dynamic has helped fuel the rapid growth of the BNPL industry as consumers seek alternative financing options.

Zoom out: Banks that write off subprime consumers as too risky are missing a sizable opportunity. That makes precision more valuable than avoidance: Lenders that rely on broad averages may miss borrowers they can serve profitably.

Recommendations: Rather than treating subprime borrowers as a single high-risk category, institutions should segment customers based on income stability, spending patterns, and repayment behavior to identify those with strong long-term potential. 

Many subprime consumers are not avoiding credit—they are seeking products that better align with their financial realities. By offering smaller credit lines, flexible repayment options, and clear pathways to credit-building, banks can compete more effectively with BNPL providers and fintechs while controlling risk. For many institutions, the opportunity is to improve how they underwrite, serve, and retain a customer segment that has largely been left to competitors.

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