It happens every six months like clockwork: brand marketers in every industry stop what they’re doing and turn their attention to the “Taking Stock with Teens” survey conducted by analyst firm Piper Sandler. The firm’s semiannual report helps companies gain insight into the habits and mindsets of young consumers, from which social media apps they use to how many hold a part-time job to which political and social issues they care most about.
Why do so many businesses care about these seemingly disparate trends? Because companies know that the brands, devices, and media that young adults get used to interacting with are likely to stay with them for the long term (just think about how much your music tastes are shaped by what you listened to in your teens and twenties).
So how can companies appeal to younger generations? It’s not just about great products, celebrity endorsements, and highly targeted marketing campaigns (though these things certainly help); it’s also about making it as convenient, frictionless, and enjoyable as possible for your customers to pay you.
Here are three ways to create a payments strategy that’ll attract a younger audience—one that’s likely to stick with your brand for the long term.
1. Offer alternatives to credit card payments
Though credit cards and payments have been synonymous for decades, entering a credit card number at checkout doesn’t come as naturally to millennials and Gen Z consumers as it does to mature consumers. Payments processor Paysafe found that only 39% of Gen Z consumers regularly pay online with a credit card. According to the Spring 2021 Piper Sandler report, teens use Apple Pay more often than they swipe a credit card, and Venmo is the most-used payment app among teens. Additionally, debt-averse young consumers are flocking to “buy now, pay later” offerings like Klarna and Afterpay, eschewing credit card payments in the process.
What does this all mean for merchants? If you only offer the usual suspects—Visa, Mastercard, American Express, and Discover—at checkout, you’re likely losing out on a huge amount of revenue. (Want proof? Recurly merchants who enable PayPal see an average revenue lift of 25%.) Younger consumers want to pay using alternative payment methods, or APMs, such as Venmo and PayPal. Make sure you have the right infrastructure in place, from your subscription management platform to your gateway(s), to support these APMs.
2. Keep things fun and social
One of the biggest reasons younger consumers have embraced APMs in droves is because, well, they’re enjoyable to use. The delightful “ding” iPhones make when confirming an Apple Pay purchase is no accident, and neither is the vast selection of emojis and animated stickers available in Venmo. Simply put, members of the millennial and Gen Z generations want the purchasing process to involve a little bit of fun and whimsy.
Venmo in particular has exploded in popularity among younger people—its sweet spot is users between the ages of 18 and 35—thanks to the app’s social aspect: you’re able to scroll through your Venmo feed and see your friends’ publicly viewable transactions (though the actual transaction amounts are kept private). Venmo’s usage numbers are startling, with over 70 million active accounts in the US, up from 50 million in spring 2020. Though Venmo historically focused only on peer-to-peer payments, the app has made a significant push into the B2C space, with companies like Chipotle taking advantage of the social feed to drive significant customer acquisition at minimal cost.
Recurly now supports Pay with Venmo, allowing subscription companies to offer this engaging APM to their customers. The benefits of enabling Pay with Venmo include:
Prime placement in your subscribers’ Venmo feeds, which can help introduce your brand to your subscribers’ connections
The ability to pull funds from subscribers’ Venmo balance, if available, or their backup payment method (e.g., bank account or Venmo credit card)
One-time authentication—no need for your subscribers to log into Venmo every billing period and initiate payment
3. Provide an incentive to keep younger consumers coming back
Voluntary churn—when consumers voluntarily choose to discontinue a subscription—is a real threat to subscription businesses, accounting for 47% of all churn (if you’re curious about the other 53%, we’ve got you covered). Gen Z and millennial consumers are well-known for being early adopters of new technologies, like APMs, as well as for their ever-changing buying tastes. Anything you can do to engender loyalty among your younger consumers and get them to commit to your business is a big win.
One way subscription companies can incentivize consumers to keep coming back for more is by encouraging subscribers to prepay into an account balance (potentially giving them a discount in the process). Every time the subscriber makes a purchase, you can pull money from that balance directly. Uber, for instance, gives its users $100 in “Uber Cash” if a consumer adds $95 to their account, and enables consumers to auto-refill this balance (still earning the 5% discount) whenever it dips to a certain level. It’s a win-win: consumers benefit from the discount, while Uber enjoys greater customer loyalty (and incurs payment processing costs less frequently).
By enabling subscribers to prepay into an account balance, subscription companies can keep their customers from jumping ship and combat some of the typical reasons for voluntary churn.
Gaining the hearts and wallet share of younger consumers isn’t easy, but the rewards can be enormous—especially for subscription businesses, which by definition stand to benefit from subscriber loyalty over and over again. By offering a wide variety of APMs, such as Venmo, in addition to card payments, and giving subscribers the ability to earn a discount by prepaying into an account balance, you can significantly increase your subscription brand’s reach into the Gen Z and millennial audience.