Younger consumers (under 35 years old) favor debit cards and cash as their main method of payment over credit, according to research from the Auriemma Consulting Groups (ACG). Debit card usage has become an engrained habit among young consumers, who no longer see credit as a viable option.
44% of younger consumers said they had no interest in using credit cards as their main method of payment. This poses a significant threat to the business models of many lenders. Surprisingly cash also remains important to all segments, and consumers prefer it because they perceive it to be more convenient than alternatives.
Matt Simester, Managing Director at ACG, said, “The younger segment has been trained to think about debit, but not to think about the value of credit. When you compound this with the difficulty younger consumers have had in getting credit, there is a clear need to develop products specifically for the younger segment of the population. To align with consumer needs, these products need to allow younger consumers to build an understanding of the value of credit cards, offer interest free periods, rich rewards programmes and fraud guarantees. Traditional credit card lenders currently appear to be getting outflanked by debit providers and alternative lending sources like payday loans.”
Despite youngster’s aversion to credit, in certain European countries like France, banks try to lure young customers with special loans or credit cards targeted at them. It is common to find offers for mortgages for the “first home” or for credit cards to help stretch that first salary.