Gen Y Forces Changes to Payment Paradigm

by Tim Brinkman, ChargeSmart

Likely you are familiar with the terms Generation Y and millennials in reference to those born in the 1980s and 1990s. You might even be the parent of a millennial or one yourself.

Here are some things about Gen Y that are essential to understand if you are to serve this market of consumers successfully.

Gen Y is estimated to represent as many as 80 million people in their 20s and early 30s–the largest population segment in the U.S. since the baby boomers. They are the fastest-growing segment of the domestic work force. As such, they will comprise a bulk of your customer base.

Certain characteristics distinguish Gen Y from previous generations. Most notably, Gen Y represents the first wired generation of Americans. They grew up surrounded by computers, mobile phones, video games, the Internet, social networking and every flavor of electronic gadget and, as a result, have a much different perspective on how the world should work than their parents and grandparents.

For them, convenience is king in all activities. They want immediate, digital access to information and are unforgiving of organizations that fail to provide it. This is reflected in their spending habits and payment preferences. Millennials view themselves as empowered consumers with access to an infinite amount of unfiltered feedback and information about service providers and products online.

Millennials value choice and expect the availability of alternative payment options from their service providers and have no hesitation in communicating negatively through online channels about those who fail to meet their consumer needs. They also have proven to be much less brand loyal than previous generations and are much more likely to switch providers if a perceived better deal is presented or if they are displeased with service levels. Nevertheless, many organizations remain hesitant about catering to these preferences and offering alternative payment options.

Historically, utility companies have resisted accepting card payments primarily because of cost. Because of typically thinner operating margins, they cannot absorb the processing costs associated with traditional card acceptance in a way that makes sense financially. Utility providers might have uncertainties about accepting card payments because they cannot surcharge and lack the know-how to implement and offer a service-fee model.

The result is that many utility companies have stuck with tradition by accepting only cash, paper checks or maybe bank account information online. Previous generations of consumers have, for the most part, been willing to go along with this, but it won’t work with millennials. Bank account, Automated Clearing House and check payments are not the preferred or best option for many consumers, especially those who predominately pay with cards. Gen Y has grown up using plastic for payment; gift cards and prepaid cards have been given to them as gifts or forms of allowance since their youth. A recent study on Gen Y payment preferences conducted by Hitachi Consulting Corp. and the Bank Administration Institute (BAI) indicated that of millennials surveyed, 62 percent preferred credit and debit cards; 33 percent chose cash; 5 percent selected other payment methods; and zero percent reported using paper checks.

As Gen Y ages and becomes more established financially, they expect the option to use their preferred payment method: credit or debit cards. Beyond serving customers’ needs, there are business advantages to accepting card payments, including additional revenue stream and reduced delinquent payments.

In addition, utility companies spend, on average, $7 to $11 per year per customer to process paper checks. Processing the same bills electronically through a third-party alternative model costs nothing. Multiply that savings across hundreds of thousands or perhaps millions of customers, and it results in substantial positive income stream.

Retailers long have recognized Gen Y’s purchasing power and have invested heavily in catering to its preferences because they understand that their success depends on it. Many utility companies have done the same and are cost-effectively providing card payment options to customers by partnering with third-party providers. As a result, they are well-positioned to serve the market needs of the fastest-growing segment of their consumers.


Tim Brinkman is CEO of ChargeSmart, an alternative payment solution enabling card acceptance at no cost to the biller, allowing businesses to meet their customers’ card payment preferences without the expensive fees and technical challenges associated with traditional card acceptance programs. For more information, visit the company’s website at

More Electric Light & Power Current Issue Articles
More Electric Light & Power Archives Issue Articles

Previous articleELP Volume 89 Issue 6
Next articleBetter to Bite the Bullet Than Take it Elsewhere

No posts to display