By: Tom Pierce, Chief Marketing Officer
What’s in a decision? Are they value-maximizing equations we solve with conscious regard for outcomes or something more casual and cavalier?
If you haven’t yet had the chance to read PSCU’s recently published white paper, Eye on Payments, we’d like to provide a third post highlighting the section of the study which revealed some very interesting differences in payment preferences among the generations – the how’s and why’s of payments decisions.
We developed this study and subsequent white paper in response to some common and important credit union questions: What are the preferred payment methods for members, and which factors influence those choices?
While it’s well known that societal and cultural traits mark each generation differently, few may realize that come time for checkout, different generations of people reach for varying payment methods based on unique life events and experiences. Knowing these differences not only helps you understand your members, it can be used to shape your offerings and tailor services to the needs of various groups of members.
Generational Breakdown: Who Pays How, and Why?
Boomers – The Generation Committed to Credit
Our payments study found that common experiences within consumers’ formative years do affect payment method preferences, as well as the perceived value of those chosen methods. Contrary to stereotypes, Baby Boomers (ages 55+) are not necessarily cash-driven consumers who are firmly set in older ways. Boomers, as it turns out, prefer to use credit cards more than any other age group. Though they engage less frequently with payment apps, they do not lag far behind other age groups in terms of their usage.
Gen X – The Proof Seekers in Payments
Reluctance and skepticism are key traits of Generation X (ages 39-54); this could explain their heightened concern around identity theft as it relates to payments. This generation has experienced card fraud, along with other age groups, and while this isn’t preventing credit (34 percent) and debit (30 percent) from being their first choice in payments, it does indicate why cash is the next most preferred way to pay for purchases.
How credit unions can best serve Boomers and Gen X:
- Prioritize personal relationships: These groups are slightly more interested than other generations in doing business with a financial partner that knows them personally.
- Assuage fears around fraud and risk: Both generations remain concerned about their financial safety. In fact, 13 percent of Gen Xers and 11 percent of Boomers were victims of card fraud during this past year.
- Highlight that a smaller credit union can provide the same services as a larger institution: Out of all generational groups, Boomers and Gen X do not necessarily prioritize joining a large, national financial institution. They want to know that they will be well taken care of, for the long-term.
Older Millennials – The Debit Exception
Debit represents the preferred way to pay among Older Millennials (ages 31-38), with 40 percent selecting this payment type as their preferred choice. This is the only generation that does not view credit as the preferred payment method, and they are even comfortable using debit and bank cards for internet-based purchases. Though they are likely to use PayPal as a form of digital payment in the next six months, cash comes in as their second-most preferred payment method – even over digital wallets. They are budget-conscious, and this is what contributes to their debit card preferences.
Younger Millennials – The Adopters of Internet-Based Financial Access
Younger Millennials (ages 23-30) want Internet access to their financial information and are comfortable using their debit cards for Internet purchases. However, their preferred way to pay remains credit (41 percent) and debit (29 percent), with cash coming in as their next most preferred way to pay. They are likely to use PayPal and Venmo as digital payment methods in the next six months and since they are undergoing so many life changes, they are expected to use their credit and debit cards more than they have in previous years.
Generation Z – The Change Makers in Digital Payments
In preparation for a fast-moving change in payment methodology, all eyes should look toward Generation Z (ages 18-22). Consumers within this age range are already comfortable conducting online banking and transactions and are paving the way for a future where digital payments, quality and personal assistance will merge. Gift and prepaid cards, however, are their third highest preferred way to pay due to their safety and ease of use.
How credit unions can best serve Millennials and Gen Z:
- Serve as an active advisor for all stages of life: These younger generations, particularly Millennials, believe that credit unions are good places to get advice and guidance on financial matters.
- Highlight digital innovation and education: Meet this group where they are: online. Provide stellar customer service, while also creating a seamless online system that protects card information. These generations have reported the highest levels of card fraud over the last year. It is important to educate these younger groups on how they can protect their financial information against fraud when they make payments.
- Maintain the personal touch that is unique to credit unions: Millennials and Generation Z want to feel that their financial institution knows them and can address their needs on a personalized level. Credit unions have the unique capability to do so, given they are generally smaller and more localized.
The story of consumer preference and decision-making is a continuous one that nonetheless contains major institutional and economic shifts. Adapting to those shifts does tend to produce certain effects, and in the case of payments preferences, this means a future rife with member loyalty and growth for credit unions.