How consumer payment preferences are shaping commerce
Knowing me, knowing my wallet. There is something you can do.
Whether tapping their device or dipping their card, today’s consumers are paying in many different ways. In order to stay ahead of the game, you need to know your customers’ payment preferences and the technology that will help you meet those preferences.
Here’s a look at what the latest Socratic Technologies-Vantiv survey revealed about how consumers prefer to pay.
Debit and credit dominate, but alternative payment options are gaining ground
- 39% of Millennials prefer to use debit cards and are the only generation that prefers debit cards over all other payment types.
- 64% of consumers believe they could go a whole month without using cash. This number is even higher among Gen Xers.
- Gen Xers prefer using mobile payments more than any other generation.
- Gen Xers are adopting wearable and voice-activated devices more quickly than Boomers, Retirees, and even Millennials.
- While Millennials lag in their use of wearables and voice activated devices, a quarter are interested in using the technology if it is made available to them.
- Mobile payments fit the do-it-yourself and brand-loyal style of Gen Xers who approach shopping as a transactional experience rather than a social one.
- Although comfortable with the technology, Millennials likely don’t yet have the disposable income to purchase voice-activated and wearable devices.
Price point influences the payment type used
- Credit cards are the most preferred payment method for big-ticket items, while debit cards are most preferred when buying groceries.
- Consumers are most partial to cash when paying for transportation, and at fast food restaurants, convenience stores, and coffee shops.
- 38% of consumers don’t trust themselves to use a credit card because they are afraid they will overspend.
- Consumers feel more comfortable charging large purchases to pay later, rather than having a significant amount instantly withdrawn from their checking account.
- Budget-minded consumers are using debit cards to help keep expenses in check.
Rewards and points drive card usage
- Rewards and points are the primary driver of those who prefer credit cards.
- Cash back and rebates are the rewards consumers are most interested in.
- 55% of Millennials and 69% of Gen Xers use credit cards whenever possible in order to earn rewards and points.
- But 23% of millennials use a card that offers no rewards.
- Bonus rewards/points is noted as the primary driver to switch cards.
- Instant discounts are also an important driver to card usage.
- Consumers are wooed by cash back and rewards and are looking to make the most of what’s offered to them.
- Whether you have a loyalty card or program, offering attractive incentives attached to purchases is an effective way to get customers’ attention.
Payment preferences differ by gender
- Most preferred payment method and frequency of use varies by gender.
- Men prefer credit cards while women prefer debit cards.
- More men use their credit cards whenever possible for rewards, while more women use their credit card for emergencies only.
- Women appear more interested in using a wearable device than men.
- While men are thinking about the loyalty rewards they can earn by using their credit card, women have a budget in mind and prefer to save their credit card for special or unexpected occasions.
- Women may be more inclined to use a wearable device because of the multi-functionality it offers beyond payments.
Tips to harness more business by tuning into your customers’ payment preferences
- Offer bonus rewards/points or instant discounts such as BOGO to entice customers to enroll in your loyalty program. But if your target market is retirees, don’t count on these same types of offers as 40% won’t try a new way to pay regardless of the incentives offered.
- Make returns easier and issue store credit via a branded gift card to ensure a return visit.
- For quick serve restaurants, coffee shops and convenience stores, accepting traditional payment types may suffice. But if you’re catering to Gen Xers in particular, you’re likely to get more traction if you offer mobile alternatives.
- If women are your target market, feature discounts or BOGO offers through your loyalty program; if your customers are primarily men, be sure your loyalty program is based on earning rewards instead of discounts.
- If your business specializes in high ticket items and most of your transactions are via credit cards, ask your processing partner about solutions that can help you leverage those purchases into greater loyalty.
Considerations for financial institutions
Debit and credit cards are the go-to payment method for consumers. But staying top of wallet remains a major concern for financial institutions of all sizes, especially during peak holiday shopping periods. While Millennials prefer to pay with debit cards, how can financial institutions compete in credit card usage? Think about how to make your debit card program competitive in light of the rewards and points offerings that have made credit cards king of the wallet.
Considerations for enterprise businesses
Loyalty program participation is the Holy Grail for large enterprises and driving card usage tied to a loyalty program is an art form. Some major retailers have perfected consumer dedication, attracting customers that are 100 percent engaged with their brands. However, consumers’ increasing preference for mobile payments is challenging enterprise businesses to take the next step and incorporate loyalty programs into mobile payment applications. Doing so will help your enterprise move to the front of the pack in an increasingly crowded marketplace.
Considerations for SMBs
Smaller businesses that are focused on providing a simple and streamlined shopping experience during the holiday season hold a competitive spot in the marketplace. Being able to easily accept credit and debit cards will be important especially how, when 64 percent of consumers think they can go an entire month without using cash to pay for their purchases. Providing immediate rewards at checkout is a great incentive for consumers to shop and spend more. According to our recent research, consumers are more likely to browse in smaller stores versus larger stores, so SMBs should also create unique shopping experiences or themed events centered on holiday sales.
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