Buy Now, Pay Later: How Demographics Dictate Credit Choices for Shoppers

Jan 25 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.
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 over a billion credit cards1 in the U.S. today, 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. Not only is the number of online shoppers expected to reach over 2 billion3 globally by 2021, Americans are less reliant4 on physical currency in recent years.

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 were lumbered with record-high student loan debt as they 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 outspend Millennials. Not only do Baby Boomers have above-average credit scores,5 unlike younger generations, they are less likely6 to swap credit cards for alternative payment technology like biometrics, preferring to buy now and pay later the way they always have.

But don’t necessarily confuse their traditional payment preferences with how and where they spend their money – they’re online shopping more than you think. Not only do nearly 70% of boomers own smartphones,7 it’s estimated that over half8 will join Millennials and Gen X as digital buyers this year, especially when it comes to grocery shopping. 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. Born between 1996 and 2010, Gen Z is an overlooked demographic when it comes to credit options, but one with growing spending power. While social media and the dreaded “FOMO,” or “Fear of Missing Out,” drives9 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.10 

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.

Culture Impacts Credit Preferences in Surprising Ways

Americans are the largest group of credit card users in the world.11 The way we do things in the U.S. is not exactly a global standard – even though we sometimes think it is – and that includes our wide social acceptance for using credit. In Germany, cash remains king:12  it’s used in 80%13 of transactions, compared to only 32% in the U.S.14  In the UK, PayPal was used nearly at the same rate as credit cards in 2018.15 In the Asia-Pacific region, alternative payments dominated in 2019, accounting for more than half16 of total ecommerce sales.

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 dollar counts more than ever, and budgeting is on the rise: 66% of Americans say they will track their spending17 more carefully when the pandemic is over. Some are even turning to18 rewards balances to help make the most of their budget when it comes to necessities like groceries.

At the same time, “wants” haven’t exactly disappeared. Consumers are looking for new ways to finance both essentials and the fun stuff. About one in ten19 Americans are using installment options more now than before the pandemic, a trend championed by younger generations like Millennials and Gen Z.

With the era of social distancing in full force, it’s no surprise that Covid-19 has also dramatically increased our digital spending. Ecommerce in 2020 is set to increase 18%,20 while brick-and-mortar shopping is expected to decrease.21 PayPal also recently reported22 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 4 payments empower consumers. With card-averse Millennials and early-adopting Gen Zers, installment payments are a flexible credit option that assists in bridging the gap between purchase and payday, which helps these fast-growing consumer populations find the confidence they need to click “buy.” The interest-free Pay in 4 credit offering may help with new customer acquisition, as well as reduce abandoned check out rates, especially during changing market conditions.23


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.24 Digital payment options are in highest demand among Millennials and Gen Z.25 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.

1 US Credit Card Statistics and Stats, Statista, October 5, 2020
2 The History of Consumer Credit in One Giant Infographic, Visual Capitalist, August 2017
3 Number of digital buyers worldwide from 2014 to 2021, Statista, July 2019
4 More Americans are making no weekly purchases with cash, Pew Research Center, December 2018
5 Baby boomers remain one of two generations with above-average credit scores, Experian, January 2020
6 2020 U.S. Consumer Behavior Report, FIS Global, 2020
Millennials stand out for their technology use, Pew Research Center, 2019
8 The Pandemic has driven boomers to increase their digital shopping, eMarketer, August 2020
9 2019 Modern Wealth Survey, Charles Schwab, 2019
10 Report: Gen Z trend setters on alternative payments, Electronic Transactions Association, September 2019
11 Top Countries in Number of Payments by Cards with a Credit Function, NationMaster, 2019
12 For Many Germans, Cash is Still King, NPR, June 2019
13-14 Where Cash is Still King, Statista, August 2020
15 Omnichannel Buying Report, BigCommerce, 2018
16 Asia-Pacific Online Payment Methods 2019, yStats, 2019
17 Covid-19 and Finances Survey, TDAmeritrade, May 2020
18 New Research From PayPal Reveals How Americans Are Spending Credit Card Rewards, PayPal, June 2020
19-20 How People Pay During Covid-19, Logica, May 2020
21 US Ecommerce 2020, eMarketer, June 2020
22 PayPal Just Reported the Strongest Quarter in Its History, Barron’s, July 2020
23About Pay in 4: Loans to California residents are made or arranged pursuant to a California Financing Law License. PayPal, Inc. is a Georgia Installment Lender Licensee, NMLS #910457. Rhode Island Small Loan Lender Licensee.
24 PayPal Credit is subject to consumer credit approval
25 The How We Shop Report,, August 2020

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.

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