Why Retailers Can’t Afford To Ignore Generational Payment Preferences

generational payment preferencesMillennials and gen Z both want fast, frictionless payment experiences, but there are also key differences between the generations.

Millennials – those born between 1981 and 1996 – are now the world’s largest consumer group. But Gen Z – the generation born between 1997 and 2012 – is hot on their heels. So how do their ecommerce expectations differ? And more importantly, how can merchants meet them?

“With millennials, there’s an expectation that the payments process should be smooth, seamless and always work.”
– Moshe Winegarten, Chief Revenue Officer, Ecommpay

Gen-Z consumers feel the same way. But they also take such experiences – which many retailers have worked hard to achieve – for granted.

“It’s a baseline for them. It’s about what else you do on top to ensure they’re happy and willing to come back.”
– Olga Karablina, Head of Payment Product Development and Partner Relations, Ecommpay

In fact, one bad payment experience could push them into the arms of a rival retailer. “If there’s a glitch – their card has funds on it, but it’s been declined and they don’t know why – you lose the customer,” says Winegarten.

This may not happen as often with gen Z as it does with millennials. According to a research commissioned by Ecommpay, millennials are twice as likely to use a credit card than Gen Z and far more keen to use a debit card too (52.9% versus 31.5%). Gen-Z consumers are less bothered by the lack of a local payment option, however, with just 6.7% of 16- to 24-year-olds claiming it would cause them to abandon the checkout as opposed to 12.4% of millennials.

The research also recorded that almost two-thirds (65%) of Gen-Z respondents were “very likely” or “somewhat likely” to abandon the checkout in the middle of an online payment if their preferred payment method isn’t available. For millennials, the figure is even higher at 78.7%. That’s a lot of lost sales simply due to the lack of additional payment options, like Apple Pay or Google Pay.

Furthermore, 22.3% of Gen Z are likely to abandon the checkout process if they have to make an account on the merchant’s website or app – a considerably higher percentage than for millennials (13.1%). Gen-Z shoppers also feel almost twice as uncomfortable as millennials when it comes to sharing their card details online (20.1% versus 10.5%). This suggests that slowing down the checkout process to ask for personal information, or requesting card details, could potentially damage conversion rates among Gen-Z customers.

Buy now, pay later

Both generations are keen to see alternative payment options at the checkout – including buy now, pay later (BNPL). These services allow consumers to spread the costs of their purchases, often while incurring little to no interest. One in ten Gen-Z consumers expect to use BNPL more over the next five years, as is an even higher percentage of millennials (14.2%). In addition, this research found that around 57% of 16- to 24-year-olds, and almost 56% of 25- to 34-year-olds, feel the increasing cost of living and inflation will encourage them to use such services more.

Gen Z is less worried than millennials about getting into debt through BNPL, with twice as many millennials citing it as a concern compared with Gen Z (36.3% versus 18%). Likewise, the risks of late charges and more interest were only of concern to 17.2% of Gen Z, whereas 27.9% of 24- to 34-year-olds thought this was an issue. BNPL solutions, in general, aim to alleviate concerns by prioritising responsible lending. It employs a robust risk scoring system customised for various industries, such as retail or travel.

When asked if businesses were doing enough to educate consumers about the BNPL option at the checkout, only 36.8% of Gen-Z respondents said ‘no’ compared with 52.9% of millennials. When it comes to regulation, 35.3% of Gen Z said that BNPL needs to be further regulated. Millennials feel even stronger about better regulation, with 60.7% of respondents pushing for more rules to be implemented within this credit category. This appears to show that millennials are more up-to-speed with both the benefits and potential risks of BNPL.


However, when asked what changes would encourage them to use BNPL as a payment option, twice as many Gen-Z respondents cited ‘more pre-contractual explanations with clarity on processes and support’ (22.8% versus 10.9%). This shows that Gen-Z are perhaps not as confident as they might seem about precisely what BNPL services entail.

“Yes, there has to be a fast, frictionless flow at the checkout to mitigate the chance of an abandoned basket, but in the case of BNPL, it’s the responsibility of a trusted lender to provide a clear message within this flow of payment to help the consumer fully understand what they’re doing.” – Olga Karablina, Head of Payment Product Development and Partner Relations, Ecommpay

Looking ahead

Although open-banking payment options have yet to make much impact on ecommerce – not least because the likes of Apple and Google Pay already offer consumers quick and secure means of paying by card – it doesn’t hurt to offer millennials and Gen Z a range of options at the checkout. However, the fact that only 13.9% of Gen-Z consumers believe they completely understand what open banking is and how it is used, compared with 24.1% of 25- to 34-year-olds, suggests that Gen Z may not grasp how checkout options like ‘pay by bank’ actually work.

Looking ahead, social shopping is likely to grow in importance. Gen Z is also the most open to paying with crypto, with 23% of 16- to 24-year-olds saying they would use it if it were offered as a payment option.

“Gen Z wants to buy what they see on Instagram, and being able to take payments in that space is something we’re beginning to see and support.” – Moshe Winegarten, Chief Revenue Officer, Ecommpay

Ecommerce merchants need a trusted partner who understands these generational nuances. Because while millennials and gen Z share some similarities when it comes to payments, they also differ in countless subtle ways, such as their approach to new options like BNPL and crypto, their dislike of account creation requirements and overall brand loyalty. The merchants that recognise this and adapt their processes accordingly will ultimately be those who succeed.

This report was first published by Ecommpay and has been republished on our website with permission.

Ecommpay is a member of our Payment Service Provider panel.


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