I had the privilege of attending the NACHA Electronic Check Council meeting in Phoenix recently. The two-day meeting provided the attendees with insight into the NACHA activities, debit card models and Generation Y payment habits.
Of particular interest was how Generation Y behaves related to banking and payments. A panel of five Generation Y people was asked a series of questions and their responses are documented below. The moderator also provided commentary that related to a bigger study that had been published on the subject, but overall the findings were similar.
I think that a consumer who is unbanked or without a credit card would be more apt to get a debit card that they could use for purchasing anywhere.
Generation Y behaviors:
- They had no more than $20 cash in their wallet, many having $0 cash on hand;
- They had more than 1 banking relationship and carried their debit cards for all the relationships;
- They used their debit card as their primary payment instrument;
- When selling items, PayPal was their payment vehicle of choice;
- Although they all had checking accounts, most didn’t write checks and the others wrote checks to parents or for car loan payments; and,
- Would like to see their mobile phone as their payment instrument as it provides securities and convenience that a wallet does not.
Given the above information, I am amazed at the recent activity related to cash payment services for online commerce.
In case you are wondering, no, the technology companies and banks have not found a way for you to actually use cash at your computer online, but they have developed a way to use cash as a payment method in an offline way.
The customer is at the ecommerce website, they determine what they want to purchase and they go to make their purchase. One of the options is pay by cash. This option presents the consumer with an invoice that they print out. They take this invoice to a brick and mortar location that services this payment type.
The consumer presents the invoice and then pays by cash to the agent. At this point the money is in the hands of the agent, the customer has made the effort to pay and the merchant is waiting for the payment. The system then records this transaction as paid and the merchant will then receive payment (less the service fees) for the purchase. The merchant now provides online access or ships product to the consumer for the purchase.
I think that a consumer who is unbanked or without a credit card would be more apt to get a debit card that they could use for purchasing anywhere. Further, it is my belief that this readership has a market of impulse buyers.
This method takes out all of the impulse from the buying process. Even if the consumers want to make the purchase, they have to have the invoice, know where to go, get there and have the cash to make the payment.
This is certainly a system that you would want to ensure has 100 percent uptime as just imagine if the consumer gets there and they cant make the payment or the invoice isn’t recognized, definitely not a consumer experience you would want to provide. Another consideration is, how do you do recurring billing? This seems to only be good for a onetime payment.
On the other hand, having more payment methods is better. It is a common belief that if even one consumer wants to pay that way then it is worthwhile, especially if it really doesn’t cost you much to offer it. I imagine that if someone is motivated enough to go through those steps to pay you, they will be a very good customer.
Further, this is a good funds model with no chargebacks. As long as your partner is reliable, you will get paid. The final benefit is that this is definitely an anonymous way for your consumers to pay.
So as payment methods evolve and technology advances, it seems the latest addition to online payment methods are in person payments with cash!
Welcome to the 21st century.