The desire for alternative payment systems is particularly strong in younger consumers. For over two decades, making an online payment was a candid choice: card or digital wallet?
But while these two payment systems remain available to this day, the landscape has shifted considerably. From in-app payments to mobile wallets, prepaid vouchers, and even online cash, the increase of smartphones and digital technologies has created more and more ways to pay, providing users with convenience, flexibility, and choice.
More importantly, customers are now securely in the driver’s seat. They no longer have to pay using one of the methods merchants offer. Instead, they expect to use their favored payment method. And they’ll move on to another merchant if this isn’t available.
The revolution is generational.
According to our latest research, where more traditional customers remain more prepared to pay with their card and using a digital wallet as a backup, younger customers are welcoming a wider range of ways to pay.
This holds particularly 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.
- 40% habitually use in-app payments
- 34% habitually pay with a mobile wallet
- 29% regularly pay with online cash
- 25% habitually use prepaid 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 inclination for online cash payments (30%) and a lower liking towards prepaid vouchers and pins (23%).
In comparison, the popularity of alternative payment methods is much lower for customers 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
Younger customers are adopting alternatives, while older consumers are sticking with more conventional online payment methods.
There’s no denying that more youthful 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 more comprehensive 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 prepaid 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 affecting payment choices?
While there can’t be appropriation without knowledge, different generations also have differing attitudes to finance and technology. And this unquestionably influences their choice of payment methods.
Case in point, where 60% of Gen Xers use a smartphone daily, they also use credit cards more profoundly 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 comfortable with credit cards and digital wallets, so they don’t see why they should use alternatives. A Pew Research Centre study, for example, found that 43% of Baby Boomers don’t use mobile payments solely because they prefer to pay using other methods.
In comparison — and because they’re digital natives — Millennials and Gen Z are more content with tech and, so, more open to trying new technologies. At the same time, the younger customers 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 motives why younger customers 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. Moving forward, the advice for merchants couldn’t be more clear if you want to attract and engage more customers, offering more payment choices.
For more information on how we can help you offer more payment options visit our Partner Page https://btrpay.com/agent-iso-partner-program/