Why you should care
Because when such a large cohort drives change, it has ripple effects for all.
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Picture a group of 20-somethings at a restaurant. At the end of the evening, instead of putting down cash or a bunch of credit cards, one person picks up the tab and gives a meaningful glance at her smartphone.
’Nuff said — the diners know the drill. They can pay their share of the bill by transferring money to the check holder via a mobile payment service. “Often the same $500 or $100 seems to rotate between the 10 of us in our ecosystem,” says Mark Ranta, head of Digital Banking Solutions at ACI Worldwide.
Ranta is on the cusp of the millennials demographic, which is loosely defined as those born between the early 1980s and 2000. There were 83.1 million millennials in the U.S. in 2015, more than a quarter of the nation’s population.
50 percent of millennials use nontraditional payment companies.
Increasingly, millennials are resorting to going cashless and are galvanizing a shift to electronic business-to-business payments. “This is the generation who grew up with iPhones. The idea of doing things digitally is not foreign or learned, it’s native,” Ranta says.
Millennials also prefer to do banking through their smartphones: 67 percent have used a bank’s mobile app. By comparison, only 33 percent of baby boomers have used a banking app.
Ranta says that the Great Recession has a lot to answer for when it comes to millennials’ embrace of mobile payment technologies. “A lot of that generation didn’t get access to credit cards because of the financial collapse, and were pushed into using debit cards,” he explains. “The conversation really starts with debit.” Cashless systems were the right solution at the right time: They offered a debit-based principle of money transfer through an interface millennials already know and love, the mobile phone.
Paradoxically the less obtrusive payments become, the more value they contribute.
James Ray, JPMorgan Chase & Co.
The possibility of disruption from such cashless adoption by millennials will be high, Ranta predicts. After all, when such a large cohort drives trends, the rest pay attention. Estimates predict that 75 percent of the U.S. workforce will be millennial by 2030, which means the population as a whole will likely be depending a lot less on cash.
James Ray, JPMorgan Chase’s director of Merchant Services, says this is not a bad thing. “Paradoxically the less obtrusive payments become, the more value they contribute,” he says. The idea behind these “invisible payments” is that they improve the customer experience by making payments so painless, “they fade into the background,” Ray adds.
Banks have been quick to adapt. “Banks are focusing more on the digital experience and putting more functionality in their mobile apps,” Ranta says; and they’re doing this while making sure traditional banking products such as checks don’t completely disappear for those who still want them.
It’s a tricky juggling act, one which retailers are also being nudged to adopt. Millennials might be leading the charge, but the rest of the consumers are catching up. Twenty-four percent of U.S. consumers made mobile payments in 2015, and 38 percent more payments were processed through Chase QuickPay — JPMorgan’s proprietary peer-to-peer payment offering — in 2016 versus 2015.
As payment apps enter an exponential rate of adoption and as millennials drive the move to cashless (and possibly cardless) methods of payment, shopping is becoming increasingly omnichannel, conducted through a variety of platforms.
What can you and I expect? Seismic and dramatic shifts in the landscape as retailers and the rest of the economy drivers catch up.