Millennials' Credit Card Hangover and What it Means for Retail

Three ways retailers are staying in the game as millennials put as much distance as they can between them and potential debt.

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By Candace Sjogren


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Credit cards are often a topic in conversation. Some love them, others hate them, and millennials avoid them altogether, instead favoring cash, debit cards or prepaid cards.

"In the years following 2008, too many Americans lost their homes and jobs and watched their credit scores plummet," explains FinanceBuzz. "As a result, many adults growing up at the time pretty much gave up and decided to avoid credit cards altogether. The thinking was that without credit cards, there would be no credit card debt and no ruined credit history to worry about."

Millennials accounted for $170 billion in purchases last year, making them one of the most powerful buying groups in today's consumer market, with purchasing power that will soon exceed that of every other generation. Yet the key factors that influence their purchasing decisions remain a mystery to merchants.

NBC News reported this year that, "Millennials are diligent in paying down debt, careful with credit cards and dedicated to accumulated savings. The burden of debt weighs so heavily that millennials have redefined financial success around it, with 46 percent saying that financial success means being debt free."

In the age where millennials, the leading consumers in our economy, refuse to take on credit card debt, how can retailers continue to sell product? Three strategies are helping merchants ride the wave of credit-conscious consumers:

1. Go mobile and get social.

When making purchasing decisions, a positive review from a friend or someone is a powerful thing. Millennials buy when they can relate.

Make it easy for your customers to talk about your products. Engage with them and their mobile devices while they are in-store. Give them the tools to brag about your brand and their purchase of it. Engage with external reviewers.

And engage socially. Work with millennial customers to explain their new purchase on YouTube. Engage on Twitter to give millennials a sounding board to share their satisfaction or dissatisfaction with a product. Finally, Snapchat has become one of the most popular ways for Millennial consumers to engage with one another and is driving meaningful purchasing decisions, so be sure you have a presence.

2. Offer short-term, low-interest financing at the point of sale.

A Bankrate study revealed that more than 65 percent of millennials don't own a credit card because they fear getting into debt that they might not be able to pay off. They are less likely to reach for plastic when purchasing, instead saving up for purchases until they can pay with cash or debit.

Millennials are still buying, however. They are exploring new ways to purchase the items they want in more financially responsible ways. Some are choosing new financing options that allow them to buy an item now and spread out their payments over several months, all while avoiding compounding interest and hidden fees. Millennials are trying these new financing innovations they believe help them maintain greater control over their financial health.

"As a millennial myself, I understand the budget crunch that my peers are facing as we pay down student loans and credit cards from our younger, less wise years," explains Kristin Slink, Chief Product Officer at LoanHero, a point of sale lender. "When merchants offer financing in the form of an installment loan at the point of sale, I am able to determine the exact amount that my payment will be and an exact payoff date, which feels less intimidating than an ever-revolving credit card."

3. Offer a new form factor--fit in their mobile wallet.

The days of layaway are a thing of the past, and the savvy merchant has learned that the future of selling to millennials is meeting them where they are already engaged: their mobile device. If you are engaging with them through their mobile device while they are in-store or online and offering budget tools and financing that offers them a manageable path to make a purchase while staying within their budget, you only need to combine the two to offer the millennial a streamlined user experience.

"Synchronous issuance is a fairly new concept that's enabling some really compelling user experiences, particularly in the purchase financing space," explains Dan Osburn, Vice President of Product at Marqeta, a payments platform powering a variety of card-related payment options. "What this entails is instantaneously generating a new payment card and automatically adding it into a mobile wallet such as Apple Wallet (Apple Pay) or Android Pay on the consumer's mobile device, which then leverages the lender's funds when the borrower taps their phone at checkout time."

While mobile payments and digital wallets may not have completely killed off cash just yet, there's no denying this is becoming the most popular preferred payment option among Millennials.

"These new developments have been designed with smartphones as the focal point, and the main aim is to make lives easier for consumers," writes Jonathan Vaux, Executive Director of Innovation Partnerships, Visa Europe Collab. "With mobile payment apps, payments can be conducted anywhere on a mobile device, taking away the pain of waiting in a traditional checkout line."

Millennials will ultimately purchase from merchants they trust. So get mobile, stay social, and offer transparent means for making purchases that meet a more disciplined budget.

Candace Sjogren

Head of Alternative Lending at Marqeta

Candace Sjogren is head of alternative lending at Marqeta and managing partner at CXO Solutions, a management consulting firm. Prior to CXO, Sjogren was the founder and CEO of two fintech companies and chief strategy officer at Dealstruck and LoanHero, and continues to serve as an angel investor.

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