Boomers vs. Millennials

Millennials Vs. Baby Boomers: When Does The 'Cashless Society' Begin?

More than one out of four millennials carry less than $5 cash with them. And according to another study, nearly 20 percent of millennials have not used cash in two months. According to a LinkedIn study, more than a third of millennials are already envisioning a cashless society, which includes no physical currency used in any transactions.

“With a fifth of millennials already rarely using cash, it is clear that this is happening relatively rapidly,” said Kalle Marsal, CMO of Mitek. “In Europe, there are several initiatives, such as in Sweden, to accelerate the shift away from physical currency, so this trend is bound to accelerate.”

The country of Sweden is already striving to be the first cashless country, in that a large number of the nation’s banks do not traffic in cash, either taking it in or doling it out, while at the same time the cash supply is dwindling. On top of that, cash machines are being dismantled and discontinued.

Clearly, the cashless society is clearly somewhere on the horizon. But on the consumer level, between millennials and baby boomers, there’s the question of who is pushing more to get society to go cashless.

“The strong growth of electronic wallets, virtual currencies and other non-cash options is indicative of millennials' openness to alternatives,” said Marsal. “A key implication of this is that millennials don’t necessarily view traditional banks as their ‘go-to’ financial institutions, and they are open to embracing financial services from a broad set of providers.”

In terms of how quickly society speeds up to go cashless, experts say it’s difficult to say because there hasn’t been a trend like this in the history of banking to date, and thus there aren’t standard benchmarks.

“Our data does suggest that the use of cash will continue to decline, though, as older millennials (30-35) have privacy reservations that will eventually ease and give way to non-cash payments once the younger demographics push those apps into ubiquitous use,” said Mike Catania, cofounder and chief technology officer of PromotionCode. “Without a doubt, the biggest implication is that [a cashless society] reduces some difficulty in making transactions and increases spending.”

Catania pointed to millennials being the third biggest generational spender in 2013, surpassing the Gen Xers and baby boomers just three years later.

“Although the employment rates and average incomes have been growing steadily for millennials since 2013, the spending pace far exceeds the gains in jobs and income, suggesting that a facility in the ability to consume is in play, which would be the trend away from cash expenditures,” he added.

As for baby boomers getting on the cashless society bandwagon, Catania said that boomers aren’t using cards for purchases under $10. Steering toward fresh Cyber Monday data, he said, “Boomers make up 40 percent of sales over $200 but less than 5 percent of sales under $10, suggesting that they're not making smaller purchases online.”

That said, experts say there are studies that say some baby boomers are adopting new methods nearly as rapidly as millennials. At the same time, as a group, they are doing so much more slowly and often reluctantly.

“As such, we expect that baby boomers will serve as a ‘counterweight’ to a complete shift away from physical currency in the near term and thus decelerate the trend some,” said Marsal. “However, it is not a trend that can be reversed.”

But what about those checks? Perhaps they’re not used for most transactions, but they clearly haven't disappeared.

According to VocaLink, 70 percent of millennials in the U.S. are still using checks, with many of them using banks — versus a mobile or smartphone — to pay them in. Their counterparts in Europe are completely different: Only 6 percent are using checks in Holland, 15 percent in Germany, and 28 percent in Italy.

“The U.S. financial system is much larger, more fragmented and more complex than that of any European country,” said Marsal. “Consequently, making systemwide changes that require buy-in from all stakeholders is much more challenging in systems with thousands of participating financial institutions compared to systems with tens or at most hundreds of participating institutions.”

Of course, checks have been in place for a long time. They’ve worked well, and many people — more so boomers — grew up using them often. As a result, experts say there’s still a bit of the prevailing concept of “if it ain’t broken, don’t fix it” and, in this case, don’t abandon it.

“The substitute must not only be much more appealing to the end user but also come with acceptable switching costs and timelines for the stakeholders,” said Marsal. “Given the high number of stakeholders in the U.S., the point where the switching costs support a complete shift has not been reached yet.”

But even if European countries aren’t using checks as frequently as their U.S. counterparts, some businesses still require checks as a method of payment for tasks such as paying rent. As a result, experts say that makes it more difficult for an entire country — or generation — to embrace a completely cashless society.

Similarly to baby boomers' slow adoption of new methods, we don’t believe that this group will be at the forefront of a ‘paperless’ society,” said Marsal. “For many consumers, it is hard to embrace new technology when it replaces something that you view as tried and true. Baby boomers will be reluctant to change, but will be unable to stop the innovation of digital payments.”

But despite this move to — and even envisioning of — a cashless society, both millennials and boomers are uncomfortable with giving away their personal information due to the sake of privacy and newsworthy system hacks. Between the groups, experts debate which one is more comfortable providing certain particular information.

“I don’t necessarily agree that millennials have a bigger concern than other groups with giving their information to businesses,” said Marsal. “However, they are still concerned, and that can be due to their better understanding and knowledge of technology and how information can be accessed and potentially abused.”

As for boomers, Marsal pointed out one study that found that baby boomers are the generation that is most likely to be wary of social media because of privacy concerns.

“Baby boomers aren’t as likely to be technologically savvy and often question new innovation out of the sake of privacy,” he said.

And Catania agrees to an extent.

“While older millennials have shown a distrust of certain aspects of the technology itself, the online spending (and thus data-sharing with business) trends are completely incongruent with a demographic that purports to take umbrage with so-called invasions of their privacy,” he said.

He believes that there is a disconnect between how millennials understand privacy and what it actually is. Because companies have increased their sophistication when it comes to data mining, he explained, it’s understandable that people think they’re protecting their privacy when in reality they’re just giving their data away.

As for when society will be completely cashless, it will take time, and some experts say the U.S. may never completely be. But they say that in the interim, millennials may be pulling the weight a bit more than their boomer counterparts.

“For millennials, it’s all about openness, innovation and not accepting the status quo at face value. If technology can enrich and simplify their life in some way, they’re very likely to embrace it,” said Marsal. “Thus, for millennials, it’s natural to question the need of physical currency since they’re very open to digital and mobile technology-based alternatives. If these substitutes provide a more convenient solution, the millennials are bound to adopt them en masse.”



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

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