Popular payment methods for millennial customers

Business owners often make the mistake of judging millennials as a generation that is bad with money simply because they have less funds to work with than their predecessors did. But the reality is that millennials don’t mess around when it comes to their finances, especially when it comes to utilising the payment methods that maximise rewards. Millennials are a trend-setting generation, and they are known for being demanding and discerning consumers. They demand creative payment options that offer increased control, security, and rewards such as cashback or free merchandise – and they are willing to shop around until they find the right platform.

Millennials are more willing than other generations to take a risk on new payment trends if they promise a better user experience or financial rewards down the line. However, brands need to offer a strong value proposition to pique their interest. Below we will take a look at five of the most popular payment methods amongst millennial consumers, as well as how growing companies can afford to offer them.

1. Digital payments

Digital payments such as virtual wallets and third-party payment arbiters like Zelle and Venmo are on the rise across demographics, but they are especially popular amongst millennials. In a 2017 survey by U.S. Bank, 49% of millennials said that they prefer digital payments to cash – which is why millennial and Gen Z-focused companies such as Abercrombie and Fitch are beginning to adopt platforms like Venmo or virtual wallets like Apple Pay to increase traffic. Payment Depot reports that the virtual card number is a single-use string of digits, and the customer enters it online or shares it over the phone. It can also be typed in manually with a
POS – and the charges are applied to the same account as the main physical card.

2. Branded credit cards

Lately there has been a lot of press about millennials destroying the credit card industry (along with just about every other industry imaginable). However, millennials do use credit cards for transactions on a regular basis, they just use fewer cards than other generations and they’re a lot more selective about the cards they use. In Deloitte’s recent millennial banking study, 80% of all transactions by millennials were actually on credit cards. However, most of the cards used were issued by a brand instead of a traditional credit card provider – and all of these cards came with rewards.

3. Cashback rewards

There’s no avoiding it: loyalty programmes are now a necessity. Millennial consumers are particularly inclined to pick a provider based on the rewards they offer and many Gen Y consumers will put elaborate plans in place to make the most of their loyalty perks and cashback rewards. In light of this, companies need to find the sweet spot between offering millennial consumers enough rewards to incentivise them to purchase and losing a significant amount of profits trying to create a competitive value proposition. This means shopping around for the right provider that would help them save money on credit card processing, thus gaining the ability to offer millennial customers the cashback rewards (as well as swag) that they demand.

4. In-app checkout

Convenience is a prime motivator for millennial consumers, and app providers are realising the necessity of eliminating friction points along their customers’ path-to-purchase in order to increase conversion. As a result, many of today’s most popular apps – some of which weren’t even built to facilitate shopping, such as Instagram – are launching in-app checkout so that consumers don’t have to open a new page just to purchase a product. When it comes to millennials, in-app checkout is even more popular than traditional payment methods, such as cash. Deloitte’s millennial payment report found that 15% of transactions were done with in-app payment methods (such as PayPal, Venmo, and Apple Pay), while only 10% were made with cash or checks.

5. Fintech startups

Millennials are a trendsetting generation that is easily bored, and this translates into a willingness to experiment with new currencies and payment platforms like blockchain – especially when there aren’t any fees or investment minimums to get started. Millennials are leaders in cryptocurrency adoption, and they significantly outrank other generations, with 17% of millennials owning crypto, compared with 9% of Gen X and 2% of Boomers. However, Gen Y’s amenability to taking financial sector disruptors out for a test drive isn’t limited to cryptocurrency.

It comes down to agility

Millennial consumers demand more from payment providers: more creativity, more cashback, more rewards, and a more interesting user experience. As such, business owners need to save wherever possible on credit card processing – which means researching the top payment solution providers and finding savings to pass along to their customers in the form of cashback rewards, loyalty points, or increased functionality. Since millennial consumers are constantly researching how to get the best possible deal from their payment solutions, businesses that also do their due diligence will be the ones that succeed with this discerning demographic.

The editorial was first published in The Payment Methods Report 2019, which provides insights into the payment methods landscape, depicting the key trends and developments in the way people pay.

About Jasmine Glasheen

Jasmine Glasheen has first-hand supply chain insights and a passion for helping modern retailers bridge the generation gap to reach young consumers. As contributing editor at Retail Wire and contributor to Payment Depot Jasmine has a unique perspective on the big conversations happening in and surrounding the retail industry.

About Payment Depot

Payment Depot is often called ‘The Costco of credit card processing’ because it offers merchants offers merchants access to a wholesale method of credit card processing—saving them an average of USD 400 per month on credit card processing.