The Rise of the Millennials – and their Declined Transactions

The Rise of the Millennials – and their Declined Transactions

Dec 13, 2022

Let’s talk about Millennials. With spending power of over $1 trillion, they make up 21% of consumer discretionary spending. The largest adult generation in the U.S. today, there are some very well-documented and consistent characteristics that define this particular generation. As we will see, many of these represent a clear and direct risk to your e-commerce strategies in general, and transaction optimization in particular.


First, the basics…

Typically the children of Baby Boomers or early Generation X, Millennials are between roughly the ages of 20 and 40. Here’s how there are generally defined demographically:

● They are the first generation to have grown up with the Internet, e-commerce, and portable technologies, as well as social media.

● Their financial stability is much shakier than that of their parents; they went through the Great Recession, the recent Covid pandemic, increasingly expensive student debt, and parents less likely to support them outright. They prefer to move from job to job, and thus have trouble increasing seniority and earning potential.

● They are growing disproportionately to previous generations, partially due to immigration of children and young adults over the past two decades. Many who come from overseas in search of a better life begin their journeys in very unstable economic situations.


A tough financial profile

Interestingly, while Millennial find themselves heavily in debt from earning their college degrees in many countries like the US, (fully a third have at least a bachelor’s degree, the highest percentage of any other generation in history), that investment does not seem to be paying off; their median earnings aren’t much different from the past two generations before them.

Why is this important to online merchants and card issuers? Because Millennials often carry credit card debt and mediocre to poor credit ratings. While they do continue to spend aggressively (more on that in a moment) and manage to make ends meet (approximately 50% report having a side hustle), it certainly puts them in a precarious position when a credit card transaction rejection is in the balance. And those declined transactions are happening a lot…


Shopping online as a way of life

Whether or not they have a surplus of funds to use, Millennials love online shopping:

67% say they prefer online shopping to visiting a brick n’ mortar store
● 54% of all their shopping happens online
● 42% shop using a mobile device
● Despite their financial constraints, millennials are becoming a significant force in the luxury consumer department; many traditional high-end brands are moving online to accommodate and capture this revenue stream.


The impact on e-commerce

So what happens when the most powerful generation, e-commerce-wise, often represents a merchant’s largest customer sector? You have to, somehow, accommodate: Up your game to meet expectations with a fluid, flawless, complaint-free user experience. When a credit card transaction is declined without a clear reason, there’s a good chance that both the merchant and card issuer are going to lose the customer. Why?

● Lack of allegiance to a brand: Because they grew up in an environment where the next vendor or service provider is just a click away, Millennials don’t hesitate to jump ship and abandon a merchant or credit card issuer. Whereas their parents felt a dedicated affiliation to a short list of stores and banks — and even the people that worked there — Millennials see them as faceless businesses, easily replaced.

● And then … they talk! : Following an unsatisfying experience, Millennials don’t simply stew in their frustration; they will usually often rush to blow off steam and warn friends on social media (the positive experiences, of course, are expected, so they don’t necessarily invest the time in talking about those). In other words, a frustrating user experience could lead to even farther-reaching damage than that customer’s own departure.

● Your technology defines you: Millennials expect a solid baseline for technology. Whether you are a boutique outfit or a veteran mega-retailer, they won’t accept mediocre UX/UI implementations, lack of clear messaging, or unexplained occurrences during standard shopping practices. If you are rejecting their card, they expect to know why — explicitly and immediately. They often won’t pick up the phone for customer service to try to rectify what they consider poor technological design by a company that should know better.

● They have options: Millennials often prefer — and even demand — Buy Now Pay Later options, or flexible payment plans like no-interest credit. With many ways to attain them, a failed credit card transaction can push them in these directions. These customer choices are, of course, more expensive for merchants.


Recipe for disaster

The main risk to e-commerce players is clearly the “gray area” in which some Millennials are categorized by automated systems. A card issuer’s platform that rejects transactions due to lack of funds or poor credit rating often lacks sufficient data for an accurate assessment; the simpler — and safer — approach is to reject the transaction. In cases like this, the customer often doesn’t understand the factors that have gone into this decision, or even comprehend that it is the credit card issuer, rather than the merchant, who is rejecting the transaction. Regardless, the result is the same: shopping cart abandonment or going to shop with a competitor.


There’s hope

The Kipp platform allows merchants and card issuers to collaborate by allowing the merchant to share in the marginal risk by paying a premium representing a couple of percentage points of the whole transaction. With this coverage, the credit card issuer can accept the Millennial’s card transaction, the merchant makes the sale, and most importantly for a shopper, the customer experience has gone ahead as expected — and will lead to many future transactions.