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Updated Jul 09, 2024

Know Your Customers: How Different Generations Prefer to Pay

From baby boomers to Gen Z, different generations tend to prefer different payment methods.

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Written By: Sean PeekSenior Analyst & Expert on Business Ownership
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Part of any business strategy includes understanding your target demographics and providing solutions that address their pain points. However, it’s not enough to know what your audience wants from your products and services. If you want to maximize your sales, it’s also essential to understand how your audience prefers to pay.

Payment method preferences — including credit and debit cards, mobile payments and buy-now-pay-later (BNPL) options — often vary among generations.

How each generation prefers to pay

Whether your goal is to attract mobile-dependent Gen Zers or tech-cautious baby boomers, you want to use the right payment tool for your clients. 

Generation Z: cash, debit cards and mobile payments

Gen Zers (born between 1997 and 2012) represent the most significant generation of buyers in the United States. According to research from SurveyMonkey, 52 percent of Gen Zers prefer debit cards for purchases, while Logica Research found that 37 percent like to pay with cash when making a purchase in person. However, because Gen Zers grew up in the digital age, they are likely to adopt online payment apps.

Gen Z is also known for being budget-conscious, thrifting their wardrobe and accessories and purchasing secondhand. However, Gen Zers are less likely to sign up for loyalty programs, with many shoppers believing such programs make them spend more than they might normally.

Gen Zers are showing caution when taking on debt and using BNPL programs. In fact, a recent study found that Gen Zers primarily use BNPL for smaller purchases — like clothing, groceries and restaurant purchases — as opposed to big-ticket items. This might be because Gen Zers have observed older generations’ struggles with credit card debt, or perhaps it’s an attempt to manage the rising cost of living and student debt.

FYIDid you know
Buyers’ preference for using debit cards for purchases declines with age, while their preference for paying with a credit card increases.

Millennials: credit cards and mobile wallets

Millennials (born between 1981 and 1996) came of age in a time of rapid technological advancement. As such, they are more likely than older consumers to use technology and mobile devices to pay. However, they are also the generation that’s most likely to pay via credit card, with 65 percent of millennials sharing that they have at least one credit card, according to Kantar

Also known as Generation Y, millennials are more likely than Gen X or baby boomers to use mobile wallets that include credit, debit and prepaid cards. About 70 percent of millennials have a PayPal account, according to GoBankingRates, and they frequently split bills or pay using a peer-to-peer payment app like Cash App or Venmo.

This reward-obsessed generation frequently signs up for branded mobile payment apps, such as Starbucks and Dunkin’, which provide regular discounts. Millennials tend to prefer smaller rewards more often, thus prolonging brand loyalty.

Did You Know?Did you know
Millennials are the generation that's most likely to have a credit card partnered with a specific airline or retailer, which hints at their affinity for benefits and loyalty perks tailored to their buying behaviors.

Generation X: credit cards

Although Gen Xers (born between 1965 and 1980) remember the analog life, they don’t usually have a problem adapting to digital services. In fact, 36 percent of Gen Xers use mobile wallets, and 22 percent of mobile wallet users link their loyalty credit cards to these wallets to accumulate reward points, FIS Global reported. 

Gen Xers are heavy users of credit cards, with 30 percent preferring to pay by credit card when dining out, 27 percent when buying groceries and 29 percent when shopping in person. This generation has far more credit card debt than millennials and baby boomers, carrying an average of nearly $8,000 in credit card debt.  

Gen X is the oldest generation that is comfortable sharing personal financial information via online apps and retailers, but compared with millennials, they remain cautious of digital payments. However, BNPL options are becoming more popular among Gen Xers, especially for purchasing clothing and furniture, according to PayPal. When the online payment system analyzed its “Pay in 4” users, the results showed that more than 50 percent of Gen X customers were repeat users of the feature.

Baby boomers: traditional payment methods

Baby boomers (born between 1946 and 1964) have seen significant changes in technology, consumerism and payment options. Like Gen X, they use credit cards but are more likely to pay their monthly balances in full. 

The baby boomer generation remains primarily attached to the traditional ways they have shopped and paid over the years. However, baby boomers are open to adapting to digital payments if doing so provides convenience and value. Like Gen Xers, baby boomers have also started using BNPL options for big-ticket items like furniture and appliances — so much so that trend predictions estimate that Gen Xers and boomers will make up approximately one-third of BNPL users by 2025, eMarketer reported.  

Bottom LineBottom line
Understanding which payment method your target audience prefers is vital to communicating that you understand who they are and what they want. It also shows that you value their business enough to tailor your payment options to their preferences.

Best POS systems for accepting payments

A point-of-sale (POS) system does more than tally sales. The best POS systems can accept multiple forms of payments, manage inventory and analyze sales data. No matter the size of your business, a POS system is essential for taking your business to the next level.

The top POS systems are easy to use and intuitive, allowing seamless integration across different payment methods. In addition, mobile POS systems combine offline and online sales to provide the big data needed to adapt to future generations.

These are some of the top POS systems:

  • Clover: Clover supports multiple payment options that appeal to all generations, including credit and debit card payments; Europay, Mastercard and Visa (EMV) chip cards; contactless payments; and online payments. Learn more in our full review of Clover.
  • Lightspeed: With Lightspeed, businesses can accept in-person credit card swipes, manually keyed-in card payments and online transactions. Lightspeed also has customer relationship management tools so companies can create tiered customer rewards programs. Read our full Lightspeed review to learn more.
  • Toast: Toast’s POS system supports online ordering and provides a contactless dining experience. It also offers robust customer loyalty programs via the Toast app, where guests can earn points every time they pay by card. Restaurants can customize how customers earn and redeem their accrued points. For more information, check out our Toast review.
  • TouchBistro: Like Toast, TouchBistro provides options for customer loyalty programs, as well as table-side ordering and payment processing, online ordering and the ability to purchase gift cards. Learn more in our TouchBistro review.
  • Cake: Cake’s POS system can help restaurants become more efficient and streamline their operations. The system is easy to use, with an intuitive interface. It provides customer support, including an implementation team to help you with the system during your first six months. For more information, read our review of Cake.

Julie Thompson and Kristen Gramigna contributed to this article.

author image
Written By: Sean PeekSenior Analyst & Expert on Business Ownership
Sean Peek co-founded and self-funded a small business that's grown to include more than a dozen dedicated team members. Over the years, he's become adept at navigating the intricacies of bootstrapping a new business, overseeing day-to-day operations, utilizing process automation to increase efficiencies and cut costs, and leading a small workforce. This journey has afforded him a profound understanding of the B2B landscape and the critical challenges business owners face as they start and grow their enterprises today. In addition to running his own business, Peek shares his firsthand experiences and vast knowledge to support fellow entrepreneurs, offering guidance on everything from business software to marketing strategies to HR management. In fact, his expertise has been featured in Entrepreneur, Inc. and Forbes and with the U.S. Chamber of Commerce.
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