It’s time for an afternoon coffee, and with no wallet in sight, a young man at the shop’s POS — or point of sale — pays with ease, using his thumbprint, or rather Touch ID, to unlock his digital wallet and pay with Apple Pay.
Here’s another scenario: Perched behind her laptop, a young woman is ordering a few apparel items online, yet cumulatively her shopping cart is out of her price range, so she opts to pay in installments — dividing payments over four equal amounts.
In yet another scenario, a group of several friends dine out, and when the check arrives, they learn the restaurant only has a two-card payment policy. Without a blink, one of the patrons uses her credit card to pay the bill while the others assume a subordinating role, asking in nondescript tones — without breaking eye contact from their smartphones — “What’s your Venmo?”
Regardless of when, how or who they’re paying, these scenarios illustrate how Millennials and Gen Zers prefer to “do things their own way.”
In response, consumer-centric and alternative payment companies emerging to meet these new demands. Through powering global transactions with user-friendly technology that offers flexibility — consumers can opt to pay now, pay later or pay to profit — the latter with cash back as the incentive.
As a result, mobile payment alone is expected to surpass $1 trillion in global transaction value by the end of this year, according to data from Statista. Cash-strapped and credit card averse, younger generations are romanced by flexible, seamless payment transactions.
Here, WWD spotlights some of the fintech companies helping retailers and brands better service the needs of today’s consumer.
Going Touch-Free With Mobile Proximity Payments
In the first scenario mentioned above, the consumer used his smartphone, powered by near-field communications or contactless technology, to initiate the purchase of coffee, a relatively routine transaction for many consumers.
According to a 2018 survey by eMarketer, globally, “for the first time, more than one-third, or 34.9 percent, of smartphone users ages 14 and older will use a mobile phone to pay for a purchase at a physical POS at least once every six months.” And China is leading with 61.2 percent of the worldwide user base in 2018.
And in the U.S., mobile proximity payments, or digital wallets, are anticipated to generate $113.79 billion in annual payment transaction value by 2019, according to Statista. The most recognizable digital wallets in the U.S. include Apple Pay and Google Pay, which provide integration of bank information to pay with phone, tablet or smartwatch with ease. Globally, the top providers include Android Pay, Apple Pay and Samsung Pay as well as Alipay and WeChat Pay.
Splitting the Bill With Mobile Payment Providers
In the third transaction scenario, Millennials are shown to be increasingly splitting the bill with PayPal-owned Venmo, a mobile payment provider servicing eerily public peer-to-peer transactions, whereby emojis appear on a social feed amongst one’s contacts.
Attuned to the issue at hand, paying for their service and being indebted to none of their surrounding peers, younger consumers are less suspect of disclosing payment details and, in fact, may be lured by transparency such as that of Venmo. And alongside a desire for transparency comes a need for control.
Creating Flexible Payments Through Installment Payments
Control over cash flow and instant financing is another preference the Millennial consumer leans toward.
With silky smooth branding of its frictionless transactions, Swedish-based bank, Klarna, slides into the installment payment space, offering consumers up to 30 days to pay and the option to slice into four equal payments, without any interest charged. For Klarna, aiming to create a payment that is more like a service, giving consumers “control, time and joy” rather than a mere transaction is just one way of facilitating better digital payments.
“According to our research, 75 percent of consumers are interested in paying off their purchases in installments,” said Sebastian Siemiatkowski, chief executive officer of Klarna.
Echoing this preference for installments and shunning of debt, as previously reported from the WWD Digital Forum in Los Angeles, Lizzy Eisenberg, director of market development at Afterpay, reiterated that “Millennials are more scared of credit card debt than they are of dying,” which is why installment plans are gaining in popularity.
Offering a modern layaway model wherein consumers get their products in-hand immediately, while aiming to budget their payments, Afterpay is one start-up banking on the Millennial spending mind-set. Growing in just four years to a $1.5 billion operation, the company’s retail clients include Urban Outfitters, Dolls Kill, Revolve, Boohoo and Free People, among others. The platform is grounded by a 4 percent merchant fee, and no interest charged to the consumer.
There are other consumer dynamics at play as well. “I think there’s a real distrust, particularly among young people, when it comes to traditional banking services,” said Adam Ezra, ceo of QuadPay. As cited by Ezra, a survey by NeoPay revealed that 50 percent of 18 to 24-year-olds lack trust in traditional banks.
And while the recession-scarred Millennials — and the up-and-coming Gen Z — garner less trust than previous generations in traditional financial institutions, qualities such as dependability and security also take a high priority.
Incentivizing Payment With Cash-Back Services
Quickly outpacing the offer of discounts and loyalty points, cash incentives are now attracting shoppers and are being used to differentiate platforms.
Speaking of the competitive differentiation needed to stay ahead in mobile payments, Brad Brodigan, chief operating officer of Dosh, told WWD, “The more innovative payment providers are using seamless rewards and incentives to help preference their payment solution over other more traditional options.”
With card-linked offers, consumers are rewarded cash back in real time, after mobile payments are made, in exchange for using a specific mode of payment.
Brodigan referenced a CardLinx Association survey that found 90 percent of respondents have indicated substantially increased usage of card-linked offers over the past 12 months.
Without a doubt, fintech start-ups have reshaped the landscape of digital payments, and it’s going to continue to warrant transparency, flexibility, control and reward — if the Millennial consumers have anything to say. It’s a time-tested truth that the ones with the money have the power.