Payments by generation:

Using data to ensure you're marketing your products through to checkout, is a ripe opportunity.

Whilst millennials could be presumed the e-generation, do they have the disposable income or the credit allowance to facilitate recurring or big purchases? And, does any generation, in a rapidly innovative age of payment options, need to wander between any payment option that doesn’t afford them the most efficient and speedy checkout process?

In 2017, 38.8bn payments were made in the UK alone. When we break these payments down by the methods in which they were made; the results can vary drastically on several variables.

Whether it be age, income, gender and even function; the data shows that even your location affects the choice a consumer makes when making a transaction.

Understanding your consumer demographic can help you predict and tailor your payment methods, and the impact they have on your conversions in business.

Each payment will also vary depending on the benefit it has in a transaction.

As consumers made 9 out of 10 of these 38.8bn payments in the UK, on a global ratio it is much the same; as most of these were made in in spontaneous ways (85% vs 15% to regular billing).

Whilst this article will reveal the heavier influence of location and technological access has on payment choice, it is wise to point out the almost non-descript affect gender has on payment choice.

With age being another main variable in payments, gender takes a non-dominant role.

Affecting platform use – there is a small discrepancy under 10% in both of the following scenarios; where men prefer to make purchases over a desktop (80% vs 72%) and women around the world (16% vs 11%) prefer mobile.

**The decline of Cash:**

Cash, whilst on the decline from 61% in 2007 to what will be 16% by 2027, will remain the predominant back up payment method for a long time, whilst other new and influential payment methods continue to split the board across different age groups, making up the rest of the share collectively.

Getting the allocation of the cash reserves out of the way – so to speak – let’s talk money in the vaguest and most intangible sense it is coming to be, in the rise of the credit cards and the e-wallet age.

Whilst the use of debit will steadily rise across the board by 49% in 2027, replacing cash as the convenient – almost digitised version of ‘cold hard cash’ – the increasing reliance on an even more convenient smartphone integration and confidence in credit is more so telling to the confidence of the consumer in handling finance and payments.

**Contactless as a gateway:**

The largest demographic is now the millennial generation. Aged 18-30, the baby boom has been reduced by a generation of which 42% prefer to make payments via their smartphone; utilizing the 95% rise in contactless payments and the introduction of e-cash and cryptocurrencies into both mainstream spending as well as e-comm checkouts.

With the rise of open-banking and 41% rise in mobile banking in the UK, the millennial generation is most likely to use their mobiles to integrate credit/debit and e-cash into one cardless interface. It is this generation that leads the walletless revolution in Asia; where cash has never been king. In fact, e-wallet use is the prime leader with a 52% market share, that is set to increase by 10% by 2022.

Currently, however, over half of millennials in the UK, still prefer to get paid in cash. Pointing to evidence that lower income earners – as typical with this age – are less likely to own a debit or credit account.

As Millennials are given less access to credit cards, they typically need accessible funds to suit the smaller value purchases that line up with their behaviours of their demographic. Alternatively, when needing to pay for a transaction; 75% of consumers within this generation prefer to settle in cash due to the usually small size of the debt and relatively new nature of P2P payments.

Equally, given the large amount of student debt or car financing millennials enter society with; another reason towards leaning into debit and cash over credit cards might be in the refusal to add to these amounts with further debt; when their lower incomes do not allow them to build their credit scores by paying it off in full each month. In fact, the 2015 diary of consumer payment choice found that income had a strong influence on payment preference, with 48% of consumers with an income lower than $25,000 USD will use cash as preferred payment method vs the other 37% that use debit; leaving a minimal portion preferring credit cards.

**Building your credit score across the demographics:**

In fact, whilst credit cards payments rose 13% from 2016 to 2017 this is likely due to consumer confidence that resulted from a recovering economy and a resultant desire to increase credit scores. Furthermore, was a demand for increased payment acceptance that included credit card brand acceptance and competition in the credit card market. Credit card usage has also increased with the more recent roll out of contactless credit cards.

The main users of credit cards are the older generations, with the statistics rising with age. In fact, of seniors over the age of 65, 38% will use credit cards (28% preferring AMEX) with 32% using debit and the other data falling into cheques and cash methods.

However, as the economy and technology develop, the credit card is losing its footing.

In continents such as the Asian Pacific, Credit cards have never really had a footing and in North America, Credit card use will fall from 34% to 27% in 2022; only to be topped by e-wallets at 29%. Similarly, across Latin America, Credit card use is currently at 45% - this is expected to fall to 29% by 2022 with the introduction of other payment methods.
E-wallet use in Asia is expected to rise from 52% to 66% in 2022.

**Changing how we settle:**

As mentioned, debit cards will take the failsafe position of cash, as cash falls from 16% to 11% when shopping in person across North America at point of sale in 2022. Currently the debit card falls under the credit card at 12% use vs 23% globally. And in 2017, 3.4 million consumers almost never used cash at all.

GenX’ers and Baby boomers, aged between 31-34 and 45-65 respectively make up the preferred debit card demographic. Whilst used alongside cash by younger demographics for smaller cash payments below $5USD; it is these generations that utilize debit cards. However will a willingness amongst 2 generations to adapt to their current use of P2P payments and online banking and the inevitable phasing out of paper banking to the disappointment of the boomers, it is the omni-channel use of e-wallets that affords the global average use to increase to 47% by 2022.

According to paypers payment method report; by the end of 2021 nearly 2.1 billion consumers will use an e-wallet to make and send payments.

**Where they pay:**

Currently e-wallet use is popularly used online by 36% of consumers, however the rate at which they are used at the point of sale in store is set to more than double by 2022; whereas cash transactions will fall to wayside.

Similarly integrated into phones, the use of contactless methods in-store -such as Apple Pay – will rise to 82% in the same time frame. Apple Pay is expected to grow by 56% to 874 million payments by 2027.

Contactless payments such as these have increased in the UK by 97% according to a study in 2017. With the data 2 years ago tallying 5.6bn contactless payments, it not only speaks to the rapid growth of technology but the superseding demographics that are growing increasingly comfortable with technology and a cardless and cashless society.

Given the current debit card statistics –with its future cementing a steady though not leading role - 78% of the 119 million contactless cards in circulation at the end of 2017 were contactless enabled; and proved to be the most popular payment method amongst its 77% of its own demographic of 25-34-year olds.

However, there was no one demographic in which the preference of contactless cards fell below 50%.

Understanding the vast ways in which payments are made and received across the world and within differing age groups act as a call to action to ecommerce and point of sale merchants to not swap but diversify the methods they offer consumers.
With even the older generations leading towards open and mobile banking, optimising payment processing for an increasing technological future is a priority.

**Sources:**

https://www.ukfinance.org.uk/system/files/Summary-UK-Payment-Markets-2018.pdf

https://www.atmia.com/news/millennials-prefer-cash-to-credit-cards/5901/

https://due.com/blog/different-demographics-prefer-different-payment-options/