Paying by finance, why every Millennial wants in


By Christer Holloman, CEO & Co-founder, Divido.

More often than not, you will hear stories in the news of millennials complaining that their generation is hard done by, but can you really blame them?

Unlike today's baby-boomers or Generation X, Millennials are saddled with an uncertain economic future and have the tightest cash flow compared to previous generations all because of the sheer complexity of modern life. This is a worrying fact and it's time we cut millennials some slack.

The burden of mounting student debt combined with an unrelenting affordable housing crisis and the fear of another credit crunch has made this generation particularly wary about their economic futures. This is translating into Millennials also becoming averse to borrowing from banks and sceptical about the financial services industry as a whole. Debt-conscious Millennials now favour prepaid and debit cards over the credit variety. This caution has two side-effects. Firstly, in a world governed by credit scores, it diminishes—some would say ironically— their potential to improve their credit scores and show that they can be trusted with credit and loans. Secondly, it means that those high-ticket, quality purchases are often deferred unnecessarily.

It's fair to say that as a generation, Millennials suffer from perhaps the largest misconception about their spending habits, often criticised for being less money-savvy to other demographics. However recent research from Deloitte suggests Millennials aren't as impulsive and money-reckless as the media makes them out to be. They are most likely, for example, to buy luxury, high-end goods when they receive extra income (such as a bonus) to avoid accruing debt. Because of this, it is crucial that businesses selling expensive aspirational goods targeted at Millennials, adjust their payment models, allowing consumers more flexibility and choice- choice that doesn't stop abruptly at the checkout. It's clear that this new wave of customer is not prepared to load up credit cards, meaning that if these businesses don't change, their sales will become more sporadic.

Rarely is this negative attitude towards credit and debt addressed by a more convenient way to pay. This is curious given that Millennials now make up a quarter of the UK population, emphasising just how valuable offering finance options to this age group can be.

Millennials value convenience, flexibility and honesty from retailers and banks; all qualities which the main credit card providers are not renowned for. Paying by finance empowers customers by giving them the choice and flexibility that they crave from businesses. Allowing consumers to take a stronger control of their finances by spreading out their costs in monthly instalments at 0% interest, not only increases loyalty but makes those previously out-of-reach purchases more of a reality by removing the initial intimidating price tag. If more retailers adopted this system, the Millennial generation has a chance of becoming the next premium consumer base.

There has been a revolution in subscription payments for digital services over the past five to ten years. From Netflix to Spotify and even Nespresso, people are now very happy to spread out and manage their costs as they earn – it's becoming the new norm. It is a model both the high street and online retailers should look to emulate in order to reach this influential generation and stay competitive.

The subscription model is now being rolled out to attract more affluent audiences with higher-ticket items such as cars as seen in Jaguar Land Rover's recent launch of Carpe. Bitesize regular payment options are another way retailers can keep their customers loyal for longer by reassuring them that they are getting a good deal with the best long-term gains.

It's clear that Millennials' affinity for technology and new ways of doing things is reshaping the retail sector and its offerings. Having a strong brand is no longer good enough to lock in a sale with them. Retailers now need to work harder, tap into the financial psyche and purchasing mindset of Millennials to give them the flexibility and choice to own their payment plans. Not only will this ensure they're not spending beyond their means, but it also allows them to buy the quality, higher-end products they desire then and there.

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