The four main generations have substantial differences across many areas of life. Does this also apply to payment choices?
The generation someone was born in can be assumed to have an impact on the type of payment method used. With each new generation, new trends are constantly emerging resulting in a highly dynamic market. Rising eCommerce usage has caused a dramatic shift within the online payments industry in not only the innovation within payments but also a change in the adoption and preference that different generations have. However, across all generations UK consumers have been more inclined to try digital payment methods as a result of COVID, with around 31% of UK consumers are confident using mobile wallets. However, over 59% of UK consumers state security is more important when influencing the use of new payment methods.
Generation: Baby Boomers
Heading into retirement years, boomers are rapidly becoming big spenders and as such are an important generation to take into consideration when choosing payment methods. Generally speaking, the baby boomer generation is more inclined to use more ‘traditional’ payment methods, with 26% prefer cash payments and 77% of Boomer generation choosing Debit or Credit card as their primary payment method. In relation to credit cards, they are the most likely generation to own AMEX, with 28% reporting to have and use AMEX. Most Baby Boomers prefer paying credit card balances in full within the same month, and 39% of baby boomers are more likely to have concern over APR in comparison to younger generations. When it comes to payment methods that are more technologically advanced or newer, the baby boomer generation tends to have a much lower and slower uptake, with only 25% of Baby Boomers use Mobile Wallets as a form of payments, and being the most suspectable to fraud and identity theft. However, 66% of boomer generation make regular purchases online, and as such they should not be discounted when taking decisions on payment types offered.
Generation: Gen X
In the prime of their careers, Gen X are an important generation to take their payment preferences into consideration. Gen X are the more likely generation to have credit card debt, with only 42% of Gen X paying their credit card balance in full each month. This has resulted in over 20% of Gen X prefer balance transfer credit cards, in order to pay debts off using credit. Despite this, the Gen X are the highest ranked generation for debit card use with 50% stating it as their main payment method preference. The generation is split between preferring the same payment methods they have always used (48%) and preferring contactless (60%) or Mobile Wallet technology (56%) believing they are easier to use.
It is projected that by 2030 Millennials will outnumber Baby Boomers by around 20 Million, increasing their purchasing power as a generation, with Millennials representing 35% of global workforce. This highlights the importance for an emphasis on the payment preference of Millennials in order to maximise the outreach and purchasing power they hold. Millennials are the generation of which use PayPal the most (37%) in comparison to only 15% of Gen X and Boomers. In relation to credit, more than 70% of millennials own a credit card and do so in an attempt to build up credit scores, with 33% of younger millennials owning a credit card, increasing to 55% in older millennials. Most payments made by those in the Millennial generation tend to use debit or bank accounts, however, the generation is split with 41% of younger millennials preferring credit to debit card in comparison to 40% of older millennials prefer debit cards. Around 37% of Millennials claim that merchant acceptance is the main driver behind accepting new payment methods, with up to 41% of the millennial generation have used, or feel confident using alternative payment methods.
Generations: Gen Z
Generation Z make up 40% of buyers in 2020, with 59% of the younger generations use online apps to invest their money. Gen Z are comfortable in using wearable technology, such as smart watches as a way of making payments, alongside both Millennials and Gen Z are over 80% likely to use contactless, over 30% likely to use mobile payments and over 50% likely to use BNPL payment methods. Only 39% of Gen Z use credit cards when paying online with Gen Z prefer online stores that save card information making checkout more seamless. Mobile and wearable technology dominate this generations payment methods with 68% of Gen Z using mobile wallet technology, the highest of all generations and. 31% of Gen Z are open to trying new payment methods if they are deemed popular on social media.
Future of Payments
With the rise in dominance of Millennials and Gen Z’s purchasing power, in future years it can be predicted that alternative payment methods, such as wearable tech, and newer will see a significant increase in usage likely aligning with the decreasing usage of cash. Improving security of current and future payment methods will be of top importance to appeal to all generations. However, whilst there is generational differences in preferred payment method, regional trends and preferences are also hugely important to take into account and will have a further influence on the choice of a population. There is a high regional influence on payment methods used, with around 450 significant local payment methods.
Report written by Iona Diack – Research Consultant HAL Payments