Talking About Generations: What’s Next for the Future of Payments?

  • Linda Weston, Head of Core Product, MD at Barclaycard Payments

  • 08.12.2022 12:15 pm
  • #payments

From baby boomers (born 1946–1964) to Gen Z (born 1997–2010), consumers in each generation have their preferred way of doing things, including how they go about making payments. These payment preferences differ significantly between age brackets, so it’s vital that businesses understand what this means for them and how they can best cater to each generation’s tendencies.  

Generational payment preferences

Baby boomer and Gen X consumers tend to lean towards more traditional payment methods, as it’s what they’re used to - with cash, physical cards and even cheques featuring under this ‘traditional payments’ umbrella. For younger generations, Millennials (1981 – 1996) and Gen Z (1997 – 2012), preferences skew towards contactless cards, Buy Now, Pay Later (BNPL) and digital wallets. In fact, research from Barclaycard Payments found that overall digital wallets now represent the highest single transaction method at 30% of sales, outstripping contactless payments in-store (24%), conventional card payments online (21%) and cash (17%).

Despite these newer payment methods proving popular, Barclaycard Payments merchant research reveals that in 2021 face-to-face payments grew to 52% of total payments (10% in 2020), compared to only 38% through e-Commerce platforms (80% in 2020). This highlights how increasingly important it is for businesses to offer their customers multiple channels to pay for goods and services. Different people have different preferences on how they like to shop. Our research on SCA shows that while mobile (at 46 per cent) is by far the most common device used by 18-34 year olds to shop online, over 55s are more likely to use a laptop (28 per cent vs 10 per cent for mobile).

Part of providing choice is making it easy for customers to cross over from online to in-store seamlessly and both pay and receive their item however best suits them. We see this omnichannel concept in action in Click and Collect, and also with ‘pay at table’ options in restaurants – an eCommerce method of paying in a physical setting which is becoming increasingly popular.

Against the backdrop of rising living costs and conscious consumerism, the trend of Recommerce – made up of recycling, renting, reusing, and reselling – is also expanding rapidly across all generations. Barclaycard Payments research recently showed that half of Brits are now choosing more sustainable ways to shop than a year ago due to heightened environmental awareness and the impact of the cost of living on spending behaviour. On average, the nation scrolls through sustainable retail sites for an average of three hours per week – rising to four and a half hours for a third (32 per cent) of Gen Z adults (18-24 year olds)

Impact on merchants

In order to meet the needs of a broad customer base, it’s clear that businesses must continue to consider if their payment infrastructure is really working for all generations – regardless of age and background. Without this consideration they could be missing out on retaining customers, and important revenue, from a host of demographics. However, at the same time, they need to continually ensure they are implementing payment processes that are effective and efficient for business operations and at the same time friction-free for customers. 

With Mandatory Strong Customer Authentication (SCA) coming into effect in March, shoppers across all generations will have noticed a new step in the checkout process – two factor authentication, whereby a cardholder is required to verify their identity, with a one-time passcode sent by SMS, or a through approval via their mobile banking app. While traditional face-to-face payments such as chip-and-pin didn’t experience any changes to the customer journey, online payments did. All online transactions over £25 are now mandated to fulfil SCA security requirements in order to be processed.

According to our Barclaycard Payments research, younger shoppers are seemingly more familiar with the benefits of two factor authentication, as 60 per cent of those aged 18-34 feel more protected since SCA was introduced, compared to 51 per cent of over 55s. However, despite shoppers embracing the added layer of security, the extra friction has naturally created some challenges for retailers. Four in five (42 per cent) Brits would choose not to shop with a company again if their payment was declined for no reason, up from 37 per cent in March 2022, while a third (32 per cent) have had to abandon a purchase because they couldn’t immediately provide the extra authentication required.

The introduction of mandatory Strong Customer Authentication (SCA) is a prime example of why merchants must continue to develop their payments offering, upgrading their systems to ensure they’re able to take as many successful online payments as possible in the future, without risking failed transactions.

New generations, new payments

With the payments landscape constantly evolving, it’s important to not only think about what consumers need now, but also what might be expected by future generations. To hold a place as a player within the payments sector from 2023 and beyond, merchants must already be considering how developing payments methods such as BNPL, contactless trends and even the Metaverse – a new virtual reality which connects the previously separate worlds of traditional brick-and-mortar store and online shopping – will change the sector in the long term. 

In essence, merchants and payments providers should recognise that with changing generations will come changing preferences, and be adapting their offering accordingly. It won’t be too long before Gen Alpha will reach an appropriate age to make independent purchases, and by then the payments landscape could appear very different compared to what consumers are used to today. What’s clear for merchants is that offering highly personalised shopping experiences and slick, seamless checkout processes will continue to be especially important.

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