The YOLO customer: an alternative view on post-covid consumer sentiment

13th October 2021

The relationship between uncertainty and consumption is not linear

In times of uncertainty, like the ongoing pandemic, it is rational to assume that people will spend less money. Economic theory says exactly that. According to uncertain consumption theory, uncertainty increases saving and reduces spending (1).

Even though spending declined by 36.5% in April 2020 (2), consumer confidence is certainly on the up. In March 2021, spending surpassed the pre-pandemic level of February 2020 (3). As we look forward to 2022, one large question remains: how will the post pandemic consumer behave?

Economists are using macroeconomic data to work out the answer to this (4). Research at the macro level, however, often ignores the role of context and individual psychology, meaning it isn’t best suited to capturing the shifts associated with shocking, sudden, or surprise changes (5)

Behavioural science offers an alternative lens through which we can interrogate the relationship between COVID-19 uncertainty and consumer spending. I suggest that, in 2022, a covid driven shift in the way we pay for things will drive impulsive consumer spending, rather than saving.


1) The ubiquity of online transactions may have reduced the ‘pain of paying’, leading to impulsive spending

One of the most notable changes in consumer behaviour triggered by COVID-19 is the speed of the shift to e-commerce. According to eMarketer (6), online orders are seeing two to three times year-on-year growth, with some retailers seeing increases of more than 20 times. Of course, the initial acceleration to e-commerce can be explained by the fact most shops were literally closed, whilst public fear around safety deterred consumers from essential shops. But why have our habits shifted towards a preference for contactless experiences, even though retailers have re-opened their doors? 

Psychologically speaking, this preference for a contactless experience is unsurprising; people don’t like to spend money. This is known as the pain of paying, we experience pain when parting with cash because we are loss averse (7). Paying for something raises activity in the insula, a region of the brain associated with pain processing. In one study, the insula was activated when subjects saw prices that were too high – it felt as if the purchase was literally wounding them.

Contactless payment methods like Apple Pay have reduced the pain of paying slightly in physical retailers, by giving consumers the sense that they are distanced from the transaction. Despite this, the pain of paying in physical shops does seem to be more palpable than when shopping online (8)

Amazon’s Dash Button is the perfect example of placing the consumer as far away from the purchase as possible. You only need to look so far as the boy who bought more than $2,000 (£1,438) worth of SpongeBob SquarePants Popsicles using his mum’s Amazon account to see this in action.

A question for Klarna and Clearpay

As products and purchases become decoupled and make impulsive spending more likely, this raises interesting ethical questions for the Buy Now Pay Later (BNPL) market. As the payment context is shifting, there is a risk that people’s inbuilt checks and balances on their consumption and spending have been lowered in the transition. 

The question is, does the rise of BNPL encourage us to make purchases we wouldn’t otherwise, causing people to step into debt? If so, how can BNPL organisations design their services to play to human psychology, so that their customers can stay in control of their borrowing?


2) The shocks of Covid have reinforced ‘live for now’ values, making long-term financial planning difficult

COVID-19 has brought a sense of loss in multiple ways – people have lost loved ones and had their freedoms taken away. These shocking and abrupt transitions have triggered mindset shifts. 

This change in context seems to have triggered social polarisation, creating two clusters of people: the ‘risk averse’, and the ‘risk hungry.’ For some, the period of isolation has afforded time for contemplation and reflection, for many though, COVID-19 has fortified a desire to ‘live for the moment.’ 

The New York Times (9) describe the current ‘YOLO economy’, where many are leaving day jobs to pursue side hustles, whilst others are cut and running to go travelling. Increased vaccination rates, a recovering job market, lockdown savings and soaring asset prices presumably underpin this at a contextual level. 

At a psychological level, this mindset shift amongst the ‘risk hungry’ can be explained by present bias. Present bias refers to the tendency to prioritise the short term at the expense of the future, and it makes long-term financial planning particularly hard (10). For instance, people are more likely to take £50 now than wait to receive £100 in 6 months.

The inherent inability of humans to think long-term is shown in early lockdown expenditure. Whilst Brits were saving in many ways, they spent £40.6 billion on a variety of fun yet frivolous items to lift spirits during lockdown. A Tom Jones jigsaw puzzle, a world war II mask and a stuffed crocodile are amongst the most bizarre items purchased (11). For many, the short-term desire for a quick pick-me-up outweighed the internal voice telling them they should probably be saving.

Present bias is closely related to loss aversion, the tendency to prefer avoiding losses to acquiring equivalent gains. For instance, people may avoid making a rational investment – where the potential gain is considerably higher than the potential loss – because the possible pain of immediate loss overwhelms the brain’s computational processes.

It seems present bias might be amplified by this post-Covid desire to ‘live for the moment.’ The loss of some of the most precious aspects of our lives – our freedoms, and even the loss of loved ones – has heightened our overall sensitivity to loss aversion. Perhaps these contextual factors reinforce a pre-existing psychological tendency to think ‘short term’, contributing to an increased desire to impulse buy.


Implications for responsible consumption

This ‘YOLO’ mindset will present new challenges for responsible buying, net zero and ‘buying local’ initiatives. Impulse buying might be a gateway to irresponsible consumption, which poses a big question for ethically minded retailers and suppliers as we move into 2022. How will they bring friction to encourage ethical, socially responsible and climate friendly consumption in this new context?


By Annabel Larke, Business Psychologist at Innovationbubble



1. Leland, H. E. (1978). Saving and uncertainty: The precautionary demand for saving. In Uncertainty in economics (pp. 127-139). Academic Press.
5. Economic uncertainty in the wake of the COVID-19 pandemic. VoxEU
6. US Consumers Shopping More Online Don’t Expect to Revert to Pre-Pandemic Behavior. eMarketer
7. Zellermayer, O. (1996). The pain of paying. Carnegie Mellon University. 
8. Does it matter whether you pay with cash or a credit card: Psychology Today
9. Welcome to the YOLO Economy. The New York Times
10. O’Donoghue, T., & Rabin, M. (1999). Doing it now or later. American economic review, 89(1), 103-124. 
Author: Innovationbubble