By: Tom Pierce, Chief Marketing Officer, PSCU
While the COVID-19 pandemic has propelled consumers of all ages to transact in new ways, there are still some notable differences in how different generations prefer to pay.
Welcome to the fourth and final installment of our blog series on Eye on Payments 2020. PSCU’s third annual consumer payments study examines payment preferences among credit union members and other financial institution customers (“non-members”) across the U.S. and how they evolved over the past year. The study shows how you can better meet these preferences and needs to drive customer experience and growth.
In our third blog from our 2020 study, we examined the primary drivers behind consumer payment choice. Today, we’ll explore the payment preferences of different generations and how financial institutions can attract and retain members across all age groups.
Survey respondents in this demographic (aged 55 to 94) indicated the fewest changes in their payment preferences over the last year. Prior to the pandemic, nearly half (48%) said they shopped online at least a few times per month. During COVID-19, this number has risen by 27%. The number of people who report shopping online at least a few times per week has more than doubled (to 15%) during COVID-19. Most plan to continue this practice post-pandemic. In addition to being comfortable with online shopping, 31% of credit union members and 17% of non-members in this generation use mobile banking.
This generation has witnessed the dawn and rise of technologies like the personal computer, smartphone and the internet, and many of them are now regular users of these channels, devices and various social media platforms. While some members of this generation still prefer traditional banking methods, many are online regularly – shopping and connecting with friends and family – and would readily embrace user-friendly digital and mobile banking options.
Out of all the generations surveyed, this group trusts their financial institution the most. If financial institutions can successfully get new offerings in front of them, the likelihood of adoption is higher given the level of trust they already have.
Gen X respondents prefer to use their debit cards, but their partiality toward credit cards as a payment method has risen. Gen X respondents do show an increase in their use of contactless cards since the pandemic: Prior to COVID-19, 62% of Gen X respondents used a contactless card at least a few times per month; that number has risen to 74% since the pandemic and is expected to remain steady. Overall, consumers in this generation are slightly less prone to use mobile banking than younger generations. However, credit union members use their mobile phones to do banking or make payments more than non-credit union members, with 63% of credit union members in this generation reporting they use mobile banking, as opposed to only 38% of non-credit union members.
Gen X is sometimes called the “sandwich generation” because consumers in this age group are often caring for both their children and their elderly parents. This generation is often juggling multiple demands and is regularly on the go. Financial institutions should offer options like contactless cards, mobile wallets and digital banking solutions that provide Gen X consumers with benefits such as convenience, fast transactions and ease of use.
Older millennials in their mid- to late thirties shop online with more frequency than any other generation, with the frequency of online purchases only increasing since the pandemic. Prior to COVID-19, 37% of older millennial respondents said they shopped online a few times a week or more; that number has grown to 45% as a result of COVID-19. Like their younger counterparts, older millennials like to make payments or do mobile banking on their mobile phones (81% of credit union members).
Similar to Gen Xers, older millennials still prefer debit as their primary payment method, but their preference for credit has risen since last year. While they generally feel comfortable using a debit card for online purchases, most say they are concerned about identity theft and make decisions about how they will pay for something based on which method is most secure.
Additionally, consumers in this age group were coming of age and entering the workforce between the time of the dot-com burst and the Great Recession. Now in its prime working years, this generation faces the economic effects of COVID-19. Financial institutions should keep these concerns top-of-mind and consider this generation’s unique and unfortunate history with our nation’s economic downturns.
Millennials in their mid- to late twenties and early thirties represent a mobile-savvy generation open to embracing new technologies. While this generation tends to lean toward debit and credit as its primary payment methods, consumers do show more interest in mobile wallet technology than their other generational counterparts. Six percent of younger millennials even cite mobile wallet technology as their first preferred payment method.
Younger millennials are also the most avid users of mobile banking technology, with 87% of credit union members and 69% of non-members saying they make payments or do banking on their mobile phones. Likewise, over one-third of credit union members aged 23 to 30 use digital tools such as Venmo, Zelle or Apple Pay as their primary method of payment.
Furthermore, consumers in this generation are digital natives who grew up during a time of rapid technological advancement. They are mobile-oriented consumers, preferring to access the internet via mobile device instead of a desktop computer. A Statista study found that millennials in the United States spend a reported 211 minutes on their smartphone each day, accessing apps or the internet, compared to only 31 minutes of daily internet use on a desktop. This generation’s mobile orientation is apparent in its payment and banking preferences.
Financial institutions must meet these consumers where they are – on their mobile devices – and provide robust mobile banking tools and digital payment options.
In 2020, the youngest generation of adult consumers indicates a strong preference for debit. In fact, Gen Z is the demographic that most prefers debit cards, with 44% of respondents aged 18-22 selecting debit as their first preferred payment method, up from 39% in 2019. This up-and-coming generation of consumers also reported strong contactless card usage prior to COVID-19, and that number has only increased since the pandemic: Nearly three-quarters (74%) of Gen Z respondents say they have used their contactless card at least a few times per month during COVID-19, and they expect that usage to hold steady.
This generation has experienced the most negative financial effects of the pandemic, with 67% indicating a loss of job, income or healthcare coverage. Prior to COVID-19, Gen Z consumers were set to come of age during an era of low unemployment and stable economic indicators. Now, uncertainty looms heavily on this young generation. The financial status of Gen Z workers has been severely impacted by the economic downturn. According to a Pew Research Center study, this impact is partially linked to nearly half of Gen Z workers being employed in highly susceptible industries (i.e., restaurants) at the beginning of the pandemic.
The level of financial anxiety this generation is currently facing presents financial institutions with the opportunity to build strong relationships with Gen Z consumers. Financial institutions should focus on support and offer personalized assistance to those who are experiencing hardship.
Reaching Across Generations
To reach customers across all generations, financial institutions must also remember that services and solutions need to reflect and be adaptable to their changing needs, wants and expectations across all channels and among all touchpoints.
Want to learn more? Download the full Eye on Payments 2020 study now! Explore the key findings and takeaways that your financial institution can leverage to effectively market to consumers and achieve enduring growth and success.
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.