Revolution in payments as young millennials shun credit
The millennial generation is shunning credit cards in favour of debit cards and other payment options, according to a new study by YouGov on behalf of payments provider Clearpay.
“UK Millennials, Shopping and Money” reveals that the younger generation is far more uncomfortable with debt than the older generation and the issue is compounded by increased student debt.
Millennials are the most valuable consumers, expected to represent 35% of the global workforce by 2020. YouGov notes there are currently 13 million UK millennials, representing a fifth of the population. Three quarters (75%) of young millennials (aged 18-24) face student debt, compared to 56% of all under 35’s.
Clearpay CEO Carl Scheible says this generational shift in attitudes is not surprising and that student debt is just one part of the picture: "[They] don't trust the establishment whether it's politically or financially. They don't like traditional banks or lenders. They feel like they've been lied to by politicians and corporates," he explains.
Scheible also believes that millennials, especially those towards the older end of the group, are suspicious of more traditional financial institutions since they came of age during the last financial crash and witnessed the issues their parents faced with debts from these banks, hence the popularity of new disruptor banks.
In the study YouGov found that people of all ages make similar use of debit cards and PayPal accounts, milliennials are significantly less likely even to own a credit card than the 35-55’s (Gen X) – at 51% against 71% - and only 7% express any interest in having one.
Though not a bank itself, Clearpay is among a new generation of payments providers (including Klarna and Laybuy) that offer consumers the chance to buy now and pay later, in the case of Clearpay this is in four instalments (25% is paid up-front with the balance taken in three interest-free direct debit payments).
Clearpay, which is part of the Australia-based Afterpay Touch Group, launched in the UK in June and has also just launched an app for UK consumers. Its service is offered by, among others, JD Sports, Urban Outfitters, and the Boohoo Group brands.
Scheible added that as well as being averse to credit and established financial institutions the digitally native millennials were also concerned by environmental issues, though this may seem at odds with their passion for fast fashion. That, he explains, is driven by social media.
"They are the green generation but they still shop on fast fashion websites because they are under so much pressure on Instagram. They are living on a budget but they are under pressure to look good," he explains.
However these consumers do aspire to buy premium and luxury items and mix them with fast fashion, which paying by instalments facilitates Scheible says. In fact, spending on fashion was millennials' biggest single discretionary spend per month after going out, according to the study.
Other highlights from the findings are:
- 85% of UK millennials are stressed by the idea of being in debt with almost half (48%)saying they’re scared of buying things using credit (which compares to 33% of Gen X)
- Young Britons are predominantly savers rather than spenders. YouGov notes that over half (53%) of younger millennials and 42% of 25-24s see themselves as more savers than spenders, which compares to just over a third (35%) of Gen X
- 9 in 10 UK millennials say they actively manage their money and believe they’re goodat saving for things they want (66% of millennials compared to 59% of Gen X)