The physical and digital payments experience has blurred and consumers are demanding digital-first payment options that extend across channels.

Digital payments were gaining momentum even before COVID-19 caused a global shift to digital commerce and payments, but the pandemic has made the case for digital-first payments clear. With online sales growing as much as 76% year-over-year, businesses and financial institutions (FIs) alike must ask some tough questions about how prepared they are for this kind of shift. While some businesses and FIs were already pivoting to offer more online and mobile transaction options, others have found the adjustment much more difficult.

Consumers hold the power when it comes to evolving payment methods, and in this digital age, they expect to have digital payment options. What’s more, sophisticated consumers have grown to expect personalized, convenient payment options. Delivering a payment experience that meets these expectations requires a look at how existing payment methods are faring — and what needs to be done to appease a growing number of consumers who are “digital natives.”

The Blurring Lines of Commerce

While purchases were once as simple as the swipe of a credit card in a point-of-sale (POS) device, today’s consumers expect a wide array of options. These include mobile order ahead, buy online and pick up in-store, contactless in-store payments, mobile banking options, and more. The lines between physical and digital have blurred and businesses and FIs must be proactive in delivering the seamless experiences customers expect.

Not only are payment methods evolving, but customer preferences are becoming more complex. One of the biggest challenges is offering payment options that satisfy customers across generational divides.

Baby Boomers

Baby Boomers (born between 1946 and 1964) love credit cards. The average Baby Boomer holds four credit cards and has a median credit limit of $11,000. In terms of special offers and benefits, more than half (52%) prefer credit cards with cash back rewards, followed closely by store credit cards. This generation also pays more attention to the APR on cards than its younger counterparts, with 39% being concerned about that metric.

Generation X

Gen Xers (born between 1965 and 1980) are early adopters of wearables and voice-activated devices for payments, though 69% say they prefer to use credit cards whenever possible in order to earn points and rewards. This would explain why they have the highest total debt of all generations, with only 42% of them paying off their credit card balances each month.


Millennials (born between 1981 and 1996) are somewhat caught in between physical and digital worlds and are the only generation that prefers debit cards over all other payment types. They do share a love for mobile commerce with Gen Z, as both report a 47% level of interest as compared to just 28% of Gen X and 10% of Baby Boomers.

Generation Z

Members of Generation Z (born between 1995 and 2015) grew up with smartphones and are no strangers to digital payments. To say they prefer them is an understatement; this generation is more likely than any other to use alternative payment methods outside of cash-based or credit card systems. For example, 40% of Gen Z consumers report having made in-app payments and 15% say they do so on a regular basis. About 34% of Gen Z consumers have used a mobile wallet before, compared to just 10% of non-Gen Z consumers who report using mobile wallets regularly.

Digital-First Payments Roadmap

The preferences outlined above make it clear that digital-first payments are not optional now or in the future. Both businesses and FIs must focus on enabling digital experiences that allow all consumers to pay how, when, and where they would like, whether that is in the comfort of their own home, or via a mobile phone at a physical location.

Delivering an optimized digital-first experience will mean increased third-party partnerships that help businesses and FIs leverage data to offer the most personalized experience possible. Platform partnerships can also ensure that online payment capabilities are safe, secure, and widely available across devices. Fraud prevention will also be a critical consideration as bad actors look to exploit vulnerabilities in new channels and payment methods. Adding an extra layer of security via tokenization can help protect sensitive payment data while reducing fraud and boosting authorization rates.

Enabling a digital-first payment experience will require a digital transformation of varying magnitudes for organizations that have disconnected front-end and back-end operations. Moving to cloud infrastructure and leveraging an API-led connectivity approach can help businesses and FIs keep all the moving pieces functioning while delivering an optimized, digital-first payments experience.

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