Personalizing the customer journey now includes the final step: Payments. You can offer the right product, at the right price, and at the right time, but if you don’t offer the customer’s preferred payment method, the sale is lost.
Perhaps the most surprising is the degree of loyalty to a payment type rather than to a brand or offering. Seeing commoditization, younger consumers will avoid friction during the purchase process, using the easiest payment option. These digital natives are unwilling to sacrifice expediency, even if it’s a simple PIN code entry. Knowing what payments appeal to existing customers is critical to retention, and understanding preferences by generation is key to new customer acquisition.
In PYMNTS most recent study, there are stark differences in how consumers prefer to pay. And those differences are generational.
- 77 percent of Boomers have credit cards, and use them less often than younger generations.
- Older consumers generally feel they have plenty of existing credit options and little use for new products.
Contrast that with an EY study on Gen Z payment preferences:
- 3X more likely to use an alternative payment method
- Debit is the most popular payment form, with 69% reporting daily or weekly use
- When the preferred [payment] method isn’t available, Gen Z respondents were twice as likely to report delaying their purchase rather than using an alternative
Payment preferences by generation
Seniors & Baby Boomers: Credit with some digital
Long used to credit cards as a primary payment method, Boomers and their elders are more likely to pay off balances vs. accruing interest and fees. These consumers continue to use credit cards, but have also adopted some digital payment methods, when valuable and convenient. Cashback offers, discounts, and availability drive use for this group. Boomers are also much less likely to leverage automatic payments, especially when compared to younger generations.
And although 45 percent of Boomers check their financial accounts daily, 23 percent never perform finance-related tasks using a mobile app.
Gen X: Rewards drive credit use
Heavy credit card use defines this age group, being particularly popular due to their convenience, rewards programs, and credit-building potential. Unsurprisingly given the use, Gen X’ers are the most likely generation to max out a credit card: 27 percent have maxed out their credit cards compared to 23 percent of millennials and 17 percent of Baby Boomers. And,. unlike Boomers, 60 percent of Gen X carry a credit card balance each month. (Bankrate)
Debit cards are also commonly used by this generation for everyday purchases, as they offer control over spending and avoid the interest associated with credit cards. However, Gen X has also increasingly adopted digital wallets like Apple Pay, Google Pay, and PayPal, especially for online shopping, due to their convenience and security features.
While credit and debit cards remain their primary payment methods, digital wallets are on the rise among Gen X, driven by a growing comfort with mobile technology and online transactions. Thirty-six percent of Gen Xers use mobile wallets, and 22 percent of mobile wallet users link their loyalty credit cards to accumulate reward points. This preference for credit has led to this generation carrying more debt than any other age cohort. Managing their money leans toward mobile apps, with 43 percent of Gen X consumers performing finance-related tasks using a mobile app at least once a day.
Millennials: Debt-averse and more mobile
They’re the generation that’s most likely to pay via credit card, with 65 percent of millennials having at least one credit card. Rewards programs and cashback benefits entice this group, as they frequently sign up for branded mobile payment apps, such as Starbucks and Dunkin’, which provide regular discounts. Interestingly, millennials tend to prefer smaller rewards more often, prolonging brand loyalty. Many millennials use credit strategically to build credit scores or earn rewards, but they're cautious about avoiding high-interest debt.
Millennials prefer digital wallets like Apple Pay, Google Pay, and PayPal as their top payment methods, especially for online and contactless in-store purchases. This generation values the convenience, speed, and security these digital options offer, particularly with the widespread adoption of smartphones and mobile banking.
Debit cards are frequently used for everyday purchases, as millennials prioritize staying within their means. However, as digital wallets continue to grow, they increasingly combine their debit and credit cards within these apps, making digital payments the most versatile and preferred option.
Gen Z: Debit (not debt) + wallets
Representing the most significant generation of buyers, Gen Z’s preferred payment methods center on digital wallets and peer-to-peer payment apps like Apple Pay, Google Pay, Venmo, and Cash App. Growing up in the digital age, Gen Z values the ease and speed of these options for both online and in-store transactions, as well as the social and convenience features they offer for splitting bills and sending money to friends.
Debit cards are also widely used by Gen Z, as many prioritize staying within budget and avoiding debt, with a focus on financial responsibility and transparency. For those who use credit, credit cards are less popular but are chosen strategically, often for building credit or earning rewards rather than for everyday purchases.
Gen Zers are cautious when taking on debt and using BNPL programs. In fact, a recent study found that Gen Zers primarily use BNPL for smaller purchases — like clothing, groceries and restaurant purchases — as opposed to big-ticket items. Taking fiscal responsibility one step further, Gen Zers are less likely to sign up for loyalty programs, with many shoppers believing such programs make them spend more than they might normally.
Loyalty lies in payments
Offering myriad payment options for buyers can secure purchases across all demographics. And it doesn’t have to be difficult or time-consuming for the issuing brand. Through embedded finance, companies can offer tailored payment options to their customers without incurring additional expense or effort. These can include wallets attached to existing loyalty programs, Save Now, Buy Later funding for planned purchases, and co-branded debit cards, allowing buyers to choose their preferred method without extensive investment — or risk to the organization.
