Buy Now, Pay Later: How demographics dictate credit choices for shoppers

Nov 18 2022 | PayPal Editorial Staff

Generational shifts and spending habits have ushered in an exciting era of payment options. Learn about who your shoppers really are – and what kind of credit best serves their needs when it comes to buying now and paying later.
With more than 66 million credit cards in the UK today,1 paying with plastic is a convenience that touches virtually every part of our lives. The origins of buying now and paying later can be traced back further than we think, to 1800 BC to be exact, when The Code of Hammurabi established the first known laws around credit in Babylon. Carved onto a massive pillar, the code created maximum interest rates around loans of grain and silver thousands of years before the modern manifestation of the credit card.2
These days, credit usage has exploded, thanks in large part to the internet. The number of ecommerce users in Europe is expected to grow to 65.3 percent of the population in 2024, and more than 7.4 million Britons are living an almost entirely cashless life.3
These shifts have produced a diverse set of credit options for a wide variety of consumers whose spending habits intersect age, nationality, and culture, as well as an increasingly unpredictable world.
When it comes to credit options, here are some things to consider to help serve the specific needs of your customers.

Generational Differences Influence Consumer Spending Habits

Millennials are open to alternative forms of credit to help them budget. The financial future has never been more uncertain for millennials, who graduated during a recession and then stumbled into a shrinking job market.
These experiences undoubtedly impacted the largest generation in the world – and their relationship with traditional credit. These so-called ‘digital natives’ tend to seek out services that won’t saddle them with more debt, while helping them budget.
Champions of traditional credit, baby boomers embrace online shopping. In the UK, 14.3 million baby boomers account for 21.3% of the population, and are also its wealthiest generation.4
Although they’ve been coined as shoppers that prefer traditional payment options with how and where they spend their money, they’re more digitally savvy than you may think. Not only do 80% of British baby boomers use smartphones,5 over 54% of baby boomers joined millennials and Gen X as digital buyers in recent years.6 This shift toward online shopping is a rising trend expected to have a lasting impact.
The consumer future belongs to Gen Z, who are experts in mobile technology. Social media and the dreaded ‘FOMO,’ or ‘Fear of Missing Out,’ drive7 their spending habits. Gen Z’s comfort with technology means they are not afraid to experiment with alternative payment options: 40% have experience making in-app payments.8
Having grown up during the 2008 recession, they’re not only budget conscious, but don’t necessarily like having debt. Their skill for seamlessly navigating and adapting to change means this fast-growing demographic could be poised to enthusiastically absorb innovative credit models.

Credit in the COVID-19 Era

The pandemic has changed our relationship with spending: budget and efficiency may be more important now than ever before. The global population hasn’t faced a crisis of this magnitude since WWII. Millions unemployed means that every pound counts more than ever, and budgeting is on the rise: 63% of UK consumers claim to be thinking more carefully about what they spend their money on.9
At the same time, ‘wants’ haven’t exactly disappeared. Consumers are looking for new ways to finance both essentials and the fun stuff. 35% of British millennials used buy now, pay later more during lockdown to help fund their online spending, and of those almost all say they will continue to use it afterwards.10
With the era of social distancing in full force, it’s no surprise that COVID-19 has also dramatically increased our digital spending. PayPal also recently reported11 its strongest quarter in its history as a public company as a result of the digital shift.

Different Options Meet the Needs of Increasingly Diverse Demographics

Pay in 3 instalment payments empower consumers. With card-averse millennials and early-adopting Gen Z, instalment payments are a credit option that assists in spreading the cost into something more easily managed, which helps these fast-growing consumer populations find the confidence they need to click ‘buy.’ The interest-free Pay in 3 instalment offering may help with new customer acquisition, as well as reduce abandoned checkout rates, especially during changing market conditions.
PayPal Credit offers a trusted option. As customer needs and spending habits change, PayPal Credit’s digital, reusable credit line offers shoppers a payment option in just seconds and is easily accessible via existing accounts with PayPal, which means it can be used to shop everywhere PayPal is accepted. Digital payment options are in highest demand among millennials and Gen Z.12 Quick and easy options like PayPal Credit could help increase the lifetime value of digital native customers. Letting them know they have the power to pay later could also prompt them to make larger or more frequent purchases
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision. Promotion of PayPal Credit in the UK may require FCA permission.
Pay in 3 and PayPal Credit eligibility is subject to status and approval. Pay in 3 is a form of credit, may not be suitable for everyone, and its use may affect your credit score. Late fees apply for missed payments. See product terms for more details.
1 Number of credit cards in issue in UK, Statista.
2 The History of Consumer Credit in One Giant Infographic, Visual Capitalist, August 2017.
3 The rise of e-commerce and the cashless society.
4 Baby Boomers Hotspots Report 2019.
5 Smartphone Usage in the UK 2012-2019, by Age, Statista.
6 Millennials stand out for their technology use, but older generations also embrace digital life, Pew Research Center, 2019.
7 FOMO Drives the Next Generation of Mobile Customers, 2018.
8 Report: Gen Z Trend Setters on Alternative Payments, Electronic Transactions Association, September 2019.
9 Future Consumer Index: Recovering amid increased UK consumer economic worries, 27 Aug 2020
10 Gen Z and millennials love Buy Now Pay Later (BNPL) Apps
11 PayPal Just Reported the Strongest Quarter in Its History, Barron’s, July 2020.
12 Billtrust’s Generation Z And Digital Payments Study

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