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Generation Y Payments Behaviors and Attitudes: Customer Service and Targeted Rewards Attract Lucrative Young Adult Segment

Published by: Javelin Strategy & Research

Published: Dec. 1, 2007 - 24 Pages


Table of Contents


Overview

Primary Questions

Findings and Analysis

Gen Y Income to Exceed that of Baby Boomers within 10 Years

Opportunities Abound for Gen Y Credit Card Issuance

Generation Y Highly Values and Seeks more from Existing Credit Card Rewards

Programs

More than Consumers overall, Gen Y is Attracted to Catalog Rewards Points

Gen Y Lives up to Anecdotal Debit Card Usage across Transaction Types

Gen Y Check Usage Is lower—particularly for more Recent Activity

The Online Channel Does Not Serve all of Gen Y’s Needs—Other Channels Cannot Be

Ignored for Customer Service

Gen Y Displays Similar Distaste for Transaction Surcharging

Gen Y Is Slightly more Trusting that Merchants Will Share Interchange Gains

Gen Y May Use Alternative Devices for Contactless Transactions at a Higher Rate than other Population Groups, but Most Prefer Card Form Factor

Higher Percentage of Gen Y Have Not Purchased Online

Privacy and Security Do Not Resonate as Clearly with Gen Y as Benefits to Drive Usage of

New Payment Types for Online Transactions

3Appendices—Additional Data about Gen Y Banking Behaviors and Attitudes

Methodology

Related Research

Table of Figures

Figure 1 Projected Income Growth by Generation

Figure 2: Credit Card Penetration among Gen Y

Figure 3: Credit Card Feature Satisfaction and Importance

Figure 4: Rewards Features Currently Earned on Credit Card

Figure 5: Payment Type Preferences for Various Purchases

Figure 6: Check Usage among Various Demographic Groups

Figure 7: Importance of Credit Card Features by Generational Group

Figure 8: Disinclination to Still Use Card with Surcharge

Figure 9: Gen Y Beliefs on Merchant Reaction to Lower Interchange

Figure 10: Willingness to Use Contactless Embedded in Other Devices

Figure 11: Gen Y Online Purchase Velocity compared to Consumers Overall

Figure 12: Benefits That Would Cause Gen Y to Consider a New Online Form of Payment

Figure 13: Importance of Features When Deciding Which Card to Use

Figure 14: Last Time Used Check, Credit or Debit as Purchase Method

Figure 15: Reasons for Abandoning an Online Purchase

Figure 16: Form of Payment Used on Last Online Purchase

Figure 17: Actions Being Taken to Keep Safe When Purchasing Online

Abstract

Financial institutions and payments companies seek to lock in long-term relationships with 18-29 year olds from their initial point of independence. Although a broad demographic, Generation Y is a target consumer population, as it already demonstrates an avid appetite for financial services and, in the near future, will generate a significantly increased share of overall US income. The key to profitability with Gen Y is to accurately characterize preferences and usage patterns. This Javelin report focuses on the affinity that Gen Y consumers have for various payment instruments, the attitudes that set them apart from the population overall, and innovative ways for financial institutions (FIs) to appeal to the group.

Primary Questions
  • What percentage of Generation Y has a credit card, and what features are most important to the group in selecting one?
  • Which methods of payment do Gen Y consumers prefer for various transaction types?
  • What does Gen Y seek in credit and debit card rewards programs, and what are sources of dissatisfaction with card programs?
  • What motivates Gen Y consumers to use alternative payment methods for online transactions?
  • Is Gen Y the digital generation, motivated only by innovations in technology and the online channel?
  • What else matters to Gen Y with respect to payments relationships?


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