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Payments

2021 Eye on Payments: Part IV – Approach to Payments Differs through Generations

By: Tom Pierce, Chief Marketing Officer, PSCU

Consumer preferences and habits can be impacted by a variety of factors, one of which is age. Typically, generational cohorts have different approaches to how they live – and this includes the way that they approach payments, with distinctive nuances in how different generations make purchases and look at their finances.

Welcome to the fourth and final installment of our blog series on our 2021Eye on Payments. PSCU’s fourth annual consumer payments study, released on Oct. 26, examines payment preferences among credit union members and other financial institution customers (“non-members”) across the U.S., including how they evolved over the past year. Through this research, PSCU explores the factors that influence consumers when it comes to their usage of traditional and emerging payment methods across multiple payment scenarios and how social and economic events impact payment choice.

In our final blog about our 2021 study, we explore different generations’ approaches to payments.

Baby Boomers – Consumers Age 57 and Above
Baby Boomers are the only generational group that favors credit over debit, with one in four respondents indicating credit cards are their preferred method of payment due to ease of use and convenience. Boomer consumers have generally been slower to adopt new payment technologies, but the pandemic has spurred an increase. Seventy-seven percent of respondents use their contactless card a few times a year, which is a 51% increase compared to pre-pandemic. Twenty-four percent of respondents use digital payment methods, like Venmo or PayPal, periodically.

Generation X – Consumers Ages 41 to 56
These digital immigrants continue to rapidly adopt new technologies and spend much of their lives online, but they also remember a time before smartphones, social media and apps. This generation favors using their debit card, with 49% of respondents saying that debit is their preferred payment method. Most respondents report that their debit card is linked to their mobile food and grocery apps, and that they are using debit for online shopping. Gen X respondents also report a significant increase in adoption of contactless cards, with nearly 90% saying they now use their contactless card at least a few times per year – a 40% increase compared to pre-pandemic.

Older Millennials – Consumers Ages 33 to 40
Older Millennials value conveniences like grocery delivery/pick-up services, digital payment methods and contactless cards. Twenty-seven percent of Older Millennials use a grocery delivery service at least a few times per week, and 75% use a service occasionally. This generation is very receptive to digital payments technology, with 27% using a tool like PayPal or Venmo as their primary payment method. Older Millennials also embrace contactless card technology, with 93% saying they use a contactless card periodically.

When it comes to new trends and opportunities like cryptocurrency, 52% say they are interested in learning about cryptocurrency from their financial institution, and 42% have already invested in the technology.

Younger Millennials – Consumers Ages 25 to 32
Younger Millennials also value convenience. Nearly two-thirds of respondents reported using mobile apps to order ahead for food pick-up and/or delivery purchases at least a few times per month, and 30% use them at least a few times per week.

Younger Millennials are the most prolific users of mobile wallet technology. More than seven in 10 respondents report using their mobile wallet occasionally, and 23% say they use the technology a few times per week. They are the most cash averse of all the generations, with only 13% of respondents saying they prefer to use cash over other payment methods. Sixty-four percent of Younger Millennials say they tend to steer away from cash now as a result of COVID-19.

Generation Z – Consumers Ages 18 to 24
This youngest generation is looking for opportunities to build credit, make healthy financial choices and embrace the payments technologies that are second nature to them. Seven in 10 Gen Z respondents prefer to use a credit card to build their credit. This age group is also the most interested in Buy Now, Pay Later (BNPL) options, with 41% reporting they would be likely or extremely likely to use a BNPL program offered by their financial institution.

Gen Z indicates the strongest preference toward debit cards of all generations, with 53% selecting debit cards as their preferred payment method and nearly eight in 10 saying they tend to pay more with debit cards than they did a few years ago. These digital natives are comfortable with innovations like contactless cards and mobile wallets, with 83% of Gen Z respondents using a variety of payment methods.

Key Takeaways
Here are the key takeaways for credit unions from each generational group of our study:

  • Baby Boomers: While this group gravitates toward credit cards, credit unions can educate them on emerging technologies and other offerings that are easy-to-use and convenient. The majority trust their financial institution to keep them safe and aware of fraudulent activity and how unexpected economic events could impact their finances, so credit unions should continue to act as a trusted financial advisor.
  • Gen X: This group has adapted to new technologies and shifted from the dawn of smartphones to new payments offerings. They are primed to adopt new ways to pay, making it important for credit unions to offer these solutions and services and act as a trusted financial advisor for these consumers.
  • Older Millennials: Many consumers in this age range are looking for new, more convenient ways to transact and interact with their credit union. They have a solid understanding of technologies like mobile wallets and contactless cards, making them more apt to utilize even newer offerings and innovations. Credit unions should keep a regular pulse on what members of this generation want and expect when it comes to innovation through regular surveys and other touchpoints.
  • Younger Millennials (and Older Millennials) are America’s largest generation, and financial services providers should place a strategic focus on this group of digital natives. This group values convenience more than ever. Credit unions should keep a close pulse on Younger Millennial members in order to provide the support and services they need and when they need them so they don’t find an alternative fintech.
  • Generation Z: The most tech-savvy generation is well-positioned to quickly latch on to new and emerging payments methods and technologies. However, they are still establishing their financial foundation, so credit unions need to be prepared to offer them cutting-edge technologies and tools and provide financial advice to set them up for long-term success.

The differences amongst generations are important for credit unions to remember when talking to their members. Focusing on the shifting preferences and expectations of consumers across generations – from digital and personalization to financial wellness and more – will position the credit union industry for growth and will fuel members’ financial health and success.

Delve into the key findings and takeaways that your credit union can leverage to effectively market to members and achieve continual growth and success. Download the full 2021 Eye on Payments study now.

In his role as SVP, Chief Marketing Officer, Tom Pierce is responsible for leading and executing PSCU’s marketing and communications strategy. Pierce has successfully led marketing teams for more than 30 years, with the latter half of his career spent in the payments industry. Prior to joining PSCU, Pierce served as Chief Marketing Officer for Cardtronics, a global ATM organization serving the retail and financial services industries, where he directed a global marketing team in the development and execution of strategic marketing and communications initiatives.