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Debit cards have become the preferred payment method among Millennials and Gen Zers for online purchases and for use in digital wallets.
A recent Carat Insights Report from Fiserv Inc. reveals that 59% of Millennials and Gen Zers use debit online because they prefer the financial control debit cards provide over their finances. Overall, 48% of consumers say they prefer using a debit card when making a purchase online, compared to 36% preferring credit and 11% favoring digital wallets.
Other demographics preferring debit cards for online purchases include the unemployed (65%) and consumers whose income is under $50,000 (58%).
“Millennials and Gen Zers prefer to pay as they go, because they tend to have less [disposable] income and want more control over their spending,” says Chris Abele, vice president of Carat and digital commerce strategy for Fiserv. “For them, putting all spending on a debit card is a simpler way to live.” Fiserv launched Carat a year ago as a digital payouts service.
The use of debit cards for online purchases has grown substantially during the Covid-19 pandemic, increasing 74% since the start of the health crisis, according to Carat Insights. One factor helping to drive that growth has been consumer’s penchant for making everyday purchases online, such as for food or orders from a quick-service restaurant. “These types of transactions lend themselves better to debit,” says Abele.
Consumers’ use of digital wallets has also grown since the onset of the pandemic, increasing more than sixfold during that period. Among all digital-wallet users, 51% are using debit, 28% credit, and 17% stored value. Among Gen Zers, 64% use debit when making a purchase with a mobile wallet.
While mobile wallets are popular for making online purchases, they are also being used more frequently in-store. Contactless payments, which include mobile wallets, account for 3% to 4% of in-store purchases, according to Carat Insights. Overall, contactless payments have increased more than two-fold since the onset of the pandemic.
Apple Pay is the most commonly used mobile wallet, accounting for 80% of purchases made using this technology.
One factor driving the use of digital wallets in-store has been merchant adoption of contactless payments in general. “If merchants did not have the ability to accept mobile wallets or mobile-wallet acceptance activated [in their point-of-sale system] pre-Covid, they since added it or switched it on,” Abele says.
Consumers’ growing preference for debit aside, the Carat Insights Report also reveals that buy now, pay later remains a popular payment option. During the third quarter, 30% of Americans used a BNPL option to make a purchase, up from 23% in the second quarter.
