Growing up in the digital world, younger generations have high expectations from companies they trust their money with. They want businesses to provide them with new technology options, including choosing from many different emerging payment options.
Nowadays, there seems to be a stark divide between those over and under their 40s regarding their payment choices. While older generations are sticking with traditional methods, younger generations – Millennials and Gen Zers embrace all other online and offline alternative payment methods.
The rise of alternative payment methods
Alternative payment methods are growing in popularity, as the rise of new technologies now allows consumers to manage their digital wallets, use online banking and smartphones with biometrics to pay for goods and services. Out of traditional cash or credit card schemes, these payment choices – a step towards a cashless society, are widely adopted by digitally native, younger generations.
Actually, some of the members of these generations can go weeks or even months without having a single dollar bill in their hands. Even when they happen to step into the mall, they don’t count on the stack of cash in their pockets – they rely on their iPhone or a smartphone, loaded with various apps, instead. This may come as a surprise to some, but nearly 7 in 10 GenZ consumers in the USA are interested in having a microchip embedded in their hand to make their purchases.
But what is causing the difference in these preferences? And how can businesses use the knowledge on preferred payment choices to decide what types of payment they will offer to their customers?
Attitudes towards finance and technology
While one could argue that younger generations use alternative payment methods simply because they are more aware of their existence, this can hardly explain the difference in their payment choices.
Research, for example, shows that both GenX and GenZ consumers have a high awareness of the mobile wallet – 83% for Gen Xers and 84% for Gen Zers. However, only 24% of Gen Xers use this payment method compared to 34% of Gen Zers who regularly use it to make their purchases.
So, awareness is just a piece of the puzzle. What matters more are the Millennials and Gen Zers’ attitudes towards technology and the level of trust they put in it. Their attitudes towards finance are also much different than their predecessors, and their habits are accordingly changed.
Millennials are far more comfortable using their mobile devices when they purchase. They are more likely to use mobile wallets, PayPal, and peer-to-peer apps than the older consumers. Furthermore, unlike Baby Boomers and Gen Xers, Millennials try to stay away from using credit cards. Even when they decide to use them, they are more likely to consider alternative credit card options, such as humm90 interest-free credit card in Australia.
Businesses often mistake by overlooking GenZ consumers’ needs, but their share in the market is growing. When it comes to their payment choices, they are even more comfortable with technology than Millenials. Their preferred choice is peer-to-peer payments, as they allow them to make financial transactions almost instantly. They love sharing their purchases with their friends, and mobile payment apps are used on a daily basis. Even though Gen Zers prefer to shop online, they are no strangers to brick-and-mortar stores, especially local ones, as they seek a genuine connection with the brand they’re buying from.
While we can explain the use of digital payment methods with the fact that for both Millenials and Gen Zers, such methods come almost naturally, their reluctance to use credit cards can be explained by a hard time accessing these methods of payment.
How can businesses adapt and attract more younger consumers?
The companies that are hesitant to include more payment methods to their customers at the checkout risk losing a significant revenue size. Whatever the reasons behind their customers’ preferred payment choices, offering just a limited number of options, such as a digital wallet and a credit card, is not enough to answer their growing expectations.
To attract more young customers whose purchasing power is rising, companies should gather more data on their purchasing behavior and habits and adapt to their needs. Even though age is a significant differentiator, other factors, such as gender and income level, should be well thought of and included in creating their strategies to create a personalized and convenient shopping experience for each of the consumers.
The key to attracting and retaining consumers today, no matter their demographics is personalization – offering each segment of your target audience the options that will fit their needs. Providing a wide variety of safe payment methods is an excellent step towards such personalization.
About Emma Worden
Emma is a digital marketer and blogger from Sydney. After getting a marketing degree she started working with Australian startups on business and marketing development. Emma writes for many relevant, industry related online publications and does a job of an Executive Editor at Bizzmark blog and a guest lecturer at Melbourne University. Interested in marketing, startups and latest business trends. Follow Emma on Twitter.