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Why payment choice is key to attracting younger consumers

The appetite for alternative payment methods is especially strong in younger consumers, according to our latest consumer research Lost in Transaction: Gen Z expectations at the checkout

For over two decades, making an online payment was a straightforward choice: card or digital wallet?

But while these two payment methods remain popular to this day, the landscape has shifted considerably. From in-app payments to mobile wallets, prepaid vouchers, and even online cash, the proliferation of smartphones and digital technologies has created more and more ways to pay, catering to the users’ desire for convenience, flexibility and choice.

More importantly, consumers are now firmly in the driver’s seat. They no longer have to pay using one of the methods merchants offer. Instead, they expect to use their preferred payment method. And they’ll move on to another merchant if this isn’t available.

The revolution is generational

The appetite for alternative payment methods is especially strong in younger consumers. According to our latest research — Lost in Transaction: Gen Z expectations at the checkout — where older consumers remain more prepared to pay with their card and using a digital wallet as backup, younger consumers are embracing a wider range of ways to pay.

This holds especially true for Gen Z i.e. consumers aged 24 or under. Our research found that less than half of Gen Z consumers — 39% — regularly pay online with a credit card compared to 49% of other consumers.

By contrast:

  • 40% habitually use in-app payments
  • 34% habitually pay with a mobile wallet
  • 29% regularly pay with online cash
  • 25% habitually use pre-paid vouchers or pins


But the trend isn’t just limited to Gen Z.

Millennials — consumers aged 25 to 39 — use alternative payment methods just as often at Gen Z. The only notable differences are that Millennials have a slightly higher preference for online cash payments (30%) and a lower affinity towards pre-paid vouchers and pins (23%).

In comparison, the popularity of alternative payment methods is much lower for consumers over the age of 40. Only 24% of Gen X (consumers aged 40 to 54) habitually use in-app payments, for instance. And even fewer Baby Boomers (consumers aged 55 to 74) use them — 16%.

Why consumers under 40 are choosing alternative payment methods

It’s clear there’s a stark divide between under 40s and over 40s when it comes to how they prefer to pay online. But why are younger consumers embracing alternatives while older consumers are sticking with more traditional online payment methods?

There’s no denying that younger consumers — and especially Gen Z — are more aware of alternative payments. Case in point, our research found that 83% of Gen Z consumers have heard of mobile wallets, while 84% have heard of in-app payments.

But while greater awareness surely plays a part in driving adoption — consumers can’t use a payment method if they’ve never heard of it — it’s only one piece of the puzzle. Indeed, the argument that more Gen Z consumers use alternative payment methods because they’re more aware of their existence doesn’t always hold water.

Consider this. While only 57% of Gen Xers and 49% of Baby Boomers have heard of pre-paid vouchers and pins, for instance, awareness of mobile wallets is high across the board. 83% of Gen Xers — just 1% less than Gen Zers — have heard of them. And 79% of Baby Boomers have also heard of them. Yet, only 24% of Gen Xers and 15% of Baby Boomers regularly pay with a mobile wallet.

So what other factors might be influencing payment choices?

Of old habitsand differing attitudes towards payments

While there can’t be adoption without awareness, different generations also have differing attitudes to finance and technology. And this undoubtedly influences their choice of payment methods.

Case in point, where 60% of Gen Xers use a smartphone daily, they also use credit cards more heavily than any other generation. This could be because they came of age at a time when it was easier to get a credit card. But it’s probably also due to their attitude towards online security — according to a LastPass study, 79% of Gen Xers worry that they’ll be hacked.

By contrast, even though Baby Boomers have been slower to adopt new technologies, those that have done so are as enthusiastic about it as younger generations. The problem is that they’re happy with credit cards and digital wallets, so they don’t see why they should use alternatives. A Pew Research Centre study, for instance, found that 43% of Baby Boomers don’t use mobile payments simply because they prefer to pay using other methods.

In comparison — and because they’re digital natives — Millennials and Gen Z are more comfortable with tech and, so, more open to trying new technologies. At the same time, the younger consumers of today have a harder time getting access to credit cards, and this may also be pushing them further towards alternative payment methods.

The future of online payments

Whatever the reasons why younger consumers prefer alternative payment methods, it’s clear that offering just card and digital wallet payments at the online checkout is no longer going to cut it. By 2020, 40% of consumers will belong to Gen Z. And this means merchants who don’t start offering more choices at the checkout risk losing a sizeable chunk of business.

At the same time, our research shows that more and more consumers of all ages are waking up to the benefits of alternative payments.

Younger generations may have the most positive attitude towards new innovations, but 65% of Gen Xers and 56% of Baby Boomers now agree automated payments will make shopping more enjoyable. And 51% of Gen Xers and 47% of Baby Boomers agree voice-activated payments are quicker and more convenient than traditional online payment methods.

Moving forward, the message for merchants couldn’t be more clear. If you want to attract and retain more customers, offering more payment choices at the online checkout is key.

Want to learn more about the ways Generation Z prefers to pay? Download Lost In Transaction: Gen Z expectations at the checkout