Our recent Bizrate Insights study reveals, there’s a notable difference between the payment options buyers use and the options they would prefer to use at checkout time. Beyond that, it seems that simply having a particular payment type in one’s wallet doesn’t always equate to a preference for using it. Let’s explore what shoppers are using, and what they really want when it comes to payments.
The Most Preferred Payments
PayPal Joins the Big Three
Not surprisingly, Visa, followed by MasterCard were the most widely preferred payment types and had the highest wallet share across all demographics including age, income and ethnicity.
But there’s a distinct generation gap when it comes to shoppers’ third most important payment option; for all generations except seniors, PayPal’s install base exceeds that of Amex.
After the two major credit cards, PayPal remains a very important payment option for younger shoppers. PayPal’s own research shows that 32% of millennials use PayPal and 25% of them prefer to use it for paying and receiving money. Among that group, 42% prefer using PayPal on their smartphone.
“PayPal’s install base exceeds that of Amex for all generations except seniors,” said Vice President of Insights, Hayley Silver. She adds: “15% of Gen Y, X and Boomers prefer to use this payment method, and the demand to use PayPal appears to exceed the supply (or ability to use it).”
PayPal’s own research shows that 32% of millennials use PayPal and 25% of them prefer to use it for paying and receiving money. Among that group, 42% prefer using PayPal on their smartphone. This is a clear signal of the importance of this payment option for younger shoppers.
Amex a Must for Seniors
Among seniors, it’s a completely different story. Amex ownership is highest in this group, with 28% of seniors owning an Amex card; meanwhile only 15% of Generation Y shoppers own an Amex card.
Amex is also a favorite among high income earners: 10% of those earning more than $100,000 own an Amex card, suggesting that Amex has successfully identified the benefits and rewards that this group covets from credit card ownership.
Amazon Pay & Discover Trail the Pack
What about other payment methods? Across all generations, Amazon Pay takes the fifth spot, with between 10 and 12% of shoppers having it, suggesting it is neither widely used nor preferred by shoppers.
Depending on the generation, between 12% and 19% of shoppers own the Discover Card and between 9% and 11% of shoppers own private label credit cards. Shoppers don’t have any particular preference for using these options, either, placing the onus on the providers to strengthen the value proposition for shoppers.
What Payments are Shoppers Using?
When asked which payment option had been used for the most recent online purchase, Visa led across all income bands.
MasterCard was in second place, with the highest usage (23%) among those earning between $30,000 and $49,999. PayPal was in third place across all income brackets, with highest usage among those earning $50,000-$74,999, and Amex was in fourth place.
What Shoppers Want From Payment Providers
So what makes shoppers want to use a particular payment option? When asked about the most important incentives a payment type can offer, the top three included:
- Discounts, coupons and promotions
- Simplicity or ease of use, and
- Information security
Discounts, coupons and promotions are most important to Gen Y and Gen X with 52% and 40% respectively citing this category as a major incentive. For Boomers (38%) and Seniors (45%), having a card that’s easy to use is much more important. Just over one third of all shoppers across age groups cited information security as a key benefit.
The picture changes slightly when you look at income brackets. For 54% of those earning less than $30,000, discounts and coupons are very important. Travel rewards mattered most to those making six-figure salaries; one-third of this group cited the perks as a factor.
Lessons for Retailers
There are several important lessons here for online retailers. For one thing, offering a great experience to your customers will depend on their age. If your core audience is in the older, high-income bracket, offering Amex as a payment option may help them feel more comfortable buying from you.
However, if your audience is younger, and especially if you’re selling to Gen Y, then it’s a must to include PayPal as a payment option.
Finally, if you’re considering offering your own cards, use the key benefits outlined above as a starting point for what would make your payment option a worthwhile “in your wallet” option for your core audience.
About this Study: This study is based on 12,404 online buyers in the U.S. and Canada. The data was collected between October 17, 2015 and October 21, 2015, via an online survey presented immediately after completing a purchase at one of over 5,000 ecommerce retailers in the U.S. Network of the Bizrate customer feedback program.