“Millennials” are Key to Debit’s Succes
 

The “millennial” generation uses electronic and emerging payments more than any other demographic, according to the 2010 Study of Consumer Payment Preferences, conducted by Hitachi Consulting and BAI and co-sponsored by PULSE. Specifically, millennials – defined in the study as anyone between the ages of 18 and 34 – prefer to pay with debit cards over any other payment options.

 

The research suggests that they prefer debit because it is fast, accessible and convenient. In order to capitalize on spending potential and trends, savvy financial institutions should develop an understanding of millennials’ key characteristics and create strategies to engage them, further fueling their use of and preference for debit.

 

“The fact that millennials are the greatest users of debit just makes sense, as they are a generation accustomed to convenience and technology,” said Cindy Ballard, PULSE executive vice president of Communications & Marketing. “Not to mention, they have experienced one of the greatest economic downfalls in our history and are more careful financially, thanks to lessons learned by their predecessors. This is a great opportunity for financial institutions to optimize their debit portfolios and create sustainable programs to grow millennials’ use of debit.”

 

  

Debit’s Share of In-Store Transactions

Source: 2010 Study of Consumer Payment Preferences

The 2010 Consumer Payment Preferences Study offers the following suggestions for issuers:
  • Continue to focus on debit as a means of migrating consumers away from cash and checks, and align operations to lower costs
  • Work with merchants in the categories of fast food, coffee shops, cinema/theater and transit to expand the preference for debit, increasing both debit volume and fee income
  • Focus marketing messages on the safety, convenience and budget control aspects of debit as a way to continue the trend
 

Additionally, millennials are making more small purchases (less than $5) on the Internet than any other group. With new technology and a clear understanding of how debit works, young people feel safe using their debit cards for shopping online, and this trend is expected to increase. Debit use in stores has climbed steadily as well, with debit accounting for 42 percent of in-store transactions in 2010 versus 37 percent in 2008, a 14 percent increase (see graph).

 

 “The continuous rise in debit usage is evidence that the new generation of consumers feels more comfortable using this payment option in the store and online, despite looming fears of fraud and identity theft,” said Ballard. “Making sure debit card programs include features that millennials require is a must.”

 

Additional findings:
  • Millennials use debit for in-store payments on par with the 35 to 54 age segment and more than those aged 55 and above
  • Debit card ownership is highest among millennials at 80 percent, as is ownership of contactless payment devices (12 percent)
  • Making purchases under $5 (micropayments) on the Internet is highest among this group (56 percent) compared to those between the ages of 35 to 54 (46 percent) and those over 55 (23 percent)
  • Although 47 percent of millennials surveyed own a checkbook, none said they prefer to pay by check
 

For additional payments industry insights, PULSE participants can go to www.pulsenetwork/research (login required).