Younger people are ditching credit cards, according to GlobalData, which notes that this is partly due to the popularity of buy-now-pay-later (BNPL) schemes. In a survey* conducted by the leading data and analytics company, 47% of people aged 18-34 revealed that they do not currently own a credit card. This had risen by 8 percentage points since an earlier survey in 2016, at which time 39% didn’t own a credit card.

Jaimini Pattani, Banking Analyst at GlobalData, comments: “Not only are alternative financing options such as BNPL increasingly offered on social media, where younger people shop, they also make purchasing on credit easier—allowing buyers to simply view credit options at the point of making a large purchase, rather than having to apply for a credit card at the bank. Further, BNPL services offer interest-free purchases, have softer credit checks, and are often manageable via apps.”

Even though banks are taking steps to appeal to younger generations, their efforts are falling short.

Pattani continues: “Australian-based CommBank introduced a fee-paying, no-interest, no-late-fee credit card with a choice of credit limits and personalized rewards. Despite its efforts to create a tailored proposition, the associated fees will make this package less attractive to younger customers.

“More typical introductory rates and standardized offerings are simply no longer attractive. In GlobalData’s survey, only 19% of 16–34-year-olds said that the traditional low or zero introductory interest rates would encourage them to uptake a new card.”

GlobalData suggests that retail banks need to show the advantages their products have over BNPL.

Pattani adds: “There is a lack of knowledge or concern for the implications of using BNPL. Retail banks have an opportunity to educate customers about how BNPL systems are often operating in an unregulated environment, have a lack of transparency around missed payments, and the impact this has on their credit files. However, they also need to tackle the benefits of BNPL head on, providing a credit card that meets the needs of younger shoppers or risk falling further and further behind.”
*The 2021 GlobalData Financial Services Consumer Survey. Sample size of 18–34-year-olds in the United Kingdom n=1,160