The Great Connected Consumer Paradox

It has been reported that by 2010, cable television in the U.S. had sort of hit its stride. Analysts report that 90% of homes with a television had a monthly cable subscription that year, reaching some 105 million homes — most of the population. Hundreds of channels of programming were a remote-control button away, even though most consumers didn’t need all their fingers and toes to count the channels they actually watched on a regular basis.

Naturally, cable became the primary outlet for news, trends and sports and replaced the broadcast TV format for movies and weekly series. Cable news and sports channels like CNN, Fox Business, MSNBC and ESPN, among others, snagged tens of millions of 24/7/365 eyeballs and billions in advertising dollars.

Around the same time, increasingly fast broadband/WiFi networks and smartphones with apps were sowing the seeds of cable industry disruption in the form of cord cutters, and later, cord-nevers, two persona groups that would ultimately change the industry’s fortunes and future.

Cord cutting started in 2008 — right around the time of the Great Recession — and slowly gained a head of steam as millennials, mostly, gravitated to the streaming content that they could access on their laptops or connected TVs — and soon thereafter, their smartphones. Netflix and specialty websites filled the news and entertainment content gap with better content delivered via new and cheaper business models. The ranks of the cord cutters rose. The rise of smartphones and apps introduced a whole new genre of consumer — the cord-nevers — for whom a cable subscription was considered irrelevant and unnecessary.

It would take another five years, until 2015, for cable providers to introduce skinny bundles at cheaper price points in an attempt to stem subscriber defections and ad dollar decline. But the die had been cast, and the days of accessing content tethered to a stationary device at a fixed location at home were numbered. By then, 64% of all Americans owned a smartphone — including 86% of 18 to 29 year olds.

This newly connected consumer, and the devices and apps they owned and used, created lots of incentives for content creators and distributors to shift their focus to consumers who wanted a diversity of content on demand 24/7/365 with a growing portfolio of connected devices.

It was the industry’s failure to respond in a relevant time frame with better experiences serving Generation Connected that sealed their fate.

You know the rest of the story. More streaming apps and more content meant more reasons to leave cable in the dust or never even bother. Today, the cable industry is on the ropes. A whole new generation of connected consumer now exists whose content preferences and providers are shaped by streaming service innovators who compete for their eyeballs and their dollars.

By the end of 2022, analysts reported that cable companies had only 38M subscribers, with a net loss of 3.5 million subscribers that year. (Don’t feel too sorry for them, since they are also the main providers of fixed broadband for homes).

It’s a notable lesson in the power of a connected consumer to, en masse, change the course of industries in the space of thirteen years, as well as the traditional players that once served them. For cable, it was initially the confluence of millennials strapped for cash and new players with better options that gave consumers the freedom to access content whenever, wherever, however. It was the industry’s failure to respond in a relevant time frame with better experiences serving Generation Connected that sealed their fate.

For payments and financial services, it’s a cautionary tale.

Who is Generation Connected?

In a word, everyone.

Nearly every adult (85%) living in the U.S. has a smartphone. Across generations, the average number of connected devices owned is five. The only thing that separates Gen X from the super-connected millennials is a smartwatch. I imagine some of you Gen Xers might be going online right now to buy one just to say you have one, too.

Everyone from Grandma to Grandkid can do almost anything, anytime and anywhere using just a smartphone and an app.

Smartwatches aside, everyone from Grandma to Grandkid can do almost anything, anytime and anywhere using just a smartphone and an app. Over time we have seen the number of connected devices shrink as smartphones get more powerful and the apps ecosystem expands.

Today, connected devices have made it possible for consumers to do more with the devices they have, time-shift everyday activities and do multiple activities at the same time. Connected devices give consumers options for how they spend the seven days of their week, including using them to avoid going to physical establishments to take care of their business.

For Generation Connected, weekdays and weekends are now indistinguishable.

PYMNTS Intelligence data shows that grocery shopping, a once Saturday morning ritual of schlepping to the grocery store, is now done as much during the week, using apps and websites, as on the weekend. Shopping for clothes is no longer the weekend or after-work trip to the stores or the mall, but nearly evenly divided between weekends and weekdays online — and often while doing other things. People use connected devices to stream almost as much during the week as they do on weekends.

Generation Connected’s Superpower

These digital experiences are contagious. PYMNTS Intelligence data finds a 17% increase in the number of consumers who do at least one activity using a website or an app year over year. In the fall of 2023, 89% of all consumers do something using a connected device and an app or a website at least once a day.

Generation Connected has perfected the art of multitasking.

The more consumers use digital methods for one thing, the more they are willing to try digital experiences in related adjacencies because they like the ease and convenience. PYMNTS Intelligence’s analysis of 15,000 consumers across 11 countries every quarter over the last three calendar years reveals that for every 10% increase in online shopping there is a 7% increase in using digital channels to shop for groceries and to access healthcare services.

Familiarity with digital experiences not only breeds a heightened level of connectedness, but a consumer who is able to easily straddle the digital and physical worlds without sacrificing the quality of the outcome.

That makes Generation Connected’s superpower their ability to do multiple things across dozens — even hundreds — of options, with a tap or a swipe or click, that in a largely analog world required being in separate physical locations to accomplish.

As a result, Generation Connected has perfected the art of multitasking.

A third of consumers order food for delivery while working, and more than a quarter place grocery orders on the job. Nearly one in five consumers check email and take work calls while shopping, 30% shop for retail purchases while taking care of others. Apps and connected devices make those experiences seamless, secure and efficient. And unobtrusive. It takes three minutes between meetings to place an order on Instacart — it takes 60 minutes or more to drive to and from the store and shop.

Generation Connected and Their Money

The on-demand nature of these connected experiences has only raised the bar for those delivering them, especially when it comes to how consumers pay and are paid.

In an always-on connected world, it’s not enough for Generation Connected to get their money faster. They want faster access to good funds on demand — whenever they want it — regardless of whether they need the money right away.

The digital transformation of every business is being driven by a consumer whose options are no longer limited to physical-world constraints or the perceived risk of leaving one provider for another.

PYMNTS Intelligence data finds that 74% of restaurant and hospitality workers want to access their tips instantly and on demand. Fewer have that option today. Seventy-two percent of consumers chose instant when asked how they’d like to be paid — they just aren’t offered that option as much as they would like, or for the use cases that matter the most: refunds, incentives, legal settlements and gaming winnings.

When it comes to paying merchants and businesses, Generation Connected wants choice, showing preference for merchants that accept their favorite way to pay. And with PYMNTS Intelligence data showing consumers using 10 different ways to pay — credit, debit, wallets, prepaid cards, cash, BNPL, installment payments and even the occasional check — ubiquity is very much determined by the consumer.

The pressures of inflation, higher interest rates and the resumption of student loan repayments have also changed consumers’ relationship with their money, and where and how they spend it. This is particularly true for the 62% of consumers who, according to September 2023 PYMNTS Intelligence data, say they need their next paycheck to meet their financial obligations.

Loyalty is no longer a given.

Only 17% of grocery shoppers say that they are loyal to a single merchant when buying food; that’s 20% for retail purchases. PYMNTS Intelligence data finds that in the last thirty days, consumers have either spent less (66%) or switched to cheaper merchants (54%) when making retail purchases, with 46% saying that the merchant with the best deal wins their business. This goes for high earners, too — more than half of whom (55%) say that they have traded down when making retail purchases, with 44% saying they traded down when buying groceries.

Connected devices and apps make those pivots possible, and even permanent.

Platform Power and the Connected Consumer

The digital transformation of every business is being driven by a consumer whose options are no longer limited to physical-world constraints or the perceived risk of leaving one retailer, grocery store, employer, or bank for another.

Or dividing their loyalty among many.

Software platforms give consumers those options. Embedded payments, finance and identity make them accessible, useful and secure.

In payments and financial services, we see Generation Connected’s influence taking hold.

Their swift embrace of BNPL and credit card installment options — something that 37% and 44% of consumers now do, according to PYMNTS Intelligence data — gives consumers a more predictable way to manage their spend and their monthly repayments. At the same time, Generation Connected continues to use their traditional debit and credit cards to pay merchants and businesses, with 37% of consumers using debit to pay for their last retail purchase and 29% using credit to do the same.

We see this in the loss of bank deposits when consumers move money to third parties, totaling about $1 trillion between April 2022 and May 2023. We see this as consumers use PayPal 40% more than they use Zelle to send money because it  gives them access to people in a much broader network.

In payments and financial services, we see Generation Connected’s influence taking hold.

At the same time, we witness the rise of Big Tech and FinTech players with a critical mass of consumers and a payments relationship of some kind moving into the traditional financial services space.  And Generation Connected clicking in. Consumers may not think of Big Tech as “their bank,” but they are happy to engage with them in select activities they once mostly did with their primary bank.

In addition to Apple Pay, Apple now has the Apple Card, Apple Pay Later, and Apple Savings, which they say has captured $10B in deposits so far in 2023. Apple has a new source of capital to support its own credit aspirations.

Seventy eight percent of consumers have a PayPal account, with 20% of them using their stored balances to pay for purchases, and another 46% using their bank account credentials to pay when shopping at a merchant.

When it comes to who consumers say they trust to deliver an everyday app experience, 15% more consumers say PayPal than their bank.

Square/Block — with its 53 million Cash App accounts and the 2022 acquisition of Afterpay — now offers an end-to-end debit/credit and banking experience for those consumers. Roughly 11% of consumers consider a non-bank financial service provider their primary bank, meaning it’s where their paycheck is deposited.

Amazon has expanded Amazon Pay off Amazon so consumers can use those credentials to pay and get free shipping. The number of things that consumers can use Amazon Pay to buy on the platform has expanded, including for virtual healthcare sessions, prescriptions, food delivery and other adjacent services. Amazon Pay and Chase have recently teamed to offer installment options on the Amazon Chase Card. Amazon offers consumers a stored value card to bank balances for future use.

Forty-six percent of consumers used browser-saved payment credentials in Chrome — that’s GPay — across one of 800,000 websites to pay a merchant in their last purchase, giving consumers an online commerce/identity passport across the web. At the same time, Google Wallet is actively expanding its utility to include stored access credentials, including driver’s licenses, hotel keys and building access credentials.

Open banking already makes the movement of money out of banks easy, with Plaid accounting for 200 million users and ambitions of its own to launch payments.

This is all coming while GenAI — and all the innovation that it will spawn — will level the playing field and up the ante for every business to use it to improve the digital experience directed to Generation Connected. It’s an enhancement that more consumers say will add value to their experiences with businesses than create privacy and security concerns.

How Generation Connected Fits in Your World

Just like cable and its hundreds of channels back in the day, Generation Connected seeks simplicity in the ever-connected world in which they live. Generation Connected’s version of a skinny bundle is not an everything app, but one that helps efficiently navigate their day-to-day. Nearly 8 in ten consumers say that such an everyday app is an experience that sounds good to them. That’s even as it’s not entirely clear what that looks like — or even what consumers mean when they use that term.

What they seem to want is a better ability to connect what they buy with how much money they can spend, with the ability to see and be served offers and promotions and recommendations for the best way to pay. The opportunity to connect shopping and payments and transactional banking services is appealing. The illusive payments-and-banking-meets-commerce trifecta becomes a fluid and dynamic way for consumers to manage and plan their spend — and then pay.

The paradox of Generation Connected is that the very thing that makes them an attractive target also makes them a flight risk.

Banks have consumers’ trust as well as their money — and, for most, the positive tailwinds that came from watching the collapse of SVB and the run on that bank and the few others that followed. But they face a new generation of connected consumers shaped by sixteen years of digital and digital-first financial services and payments experience. Today, 28% of consumers say they’d be willing to switch to an alternative provider with more innovative services. Unsurprisingly, 37% more millennials say that, too.

The paradox of Generation Connected is that the very thing that makes them an attractive target also makes them a flight risk. They can just as easily move to you as away from you, if a better experience that saves them time and money or solves a big pain point comes along.

For payments and financial services, the risk that Generation Connected poses is unlike the all-or-nothing scenario faced by the cable providers in the 2010s. Rather, it is the risk that the frictions that consumers tolerated because switching was too hard and too complicated are now the value proposition that innovators build their business and business model around. Generation Connected can test the waters as they did with cable back in the day, having both streaming and cable before finally cutting the cord.

In the not-too-distant future, a network of connected devices and sensors will make engaging with any type of business even easier and those transactions between activities and experiences seamless and secure.  Including their payments and financial services provider.

And Generation Connected’s relationships with traditional providers will become even easier to break. Traditional players may not even notice in enough time to do something about it.