They are barely out of college, but this young generation of consumers has already shortened payment technology cycles, forced virtual currency into the mainstream, and left processors scrambling to stay relevant.
They're also borderless, another generational attribute that demands flexible apps, foreign exchange and complex order fulfillment from payment companies, merchants and merchant acquirers.
"Millennials perceive fewer barriers. They're more comfortable shopping across borders and you can't necessarily say that about the general population," said Melissa O'Malley, the director of global merchant and cross-border trade initiatives at PayPal, adding young people aren't as concerned about language barriers, and have an easier time trusting merchants in "another country."
PayPal and Ipsos on Thursday released research on shopping habits of 18-34 year olds in 29 countries. Their findings include the observation that 73% of the global millennial population has made a purchase online in the past year, compared to 70% of the general population. In North America, the difference is greater—75% of young people have purchased online, as opposed to 66% of the general population. Millennials also lead in cross-border shopping, 47% to 45% globally and 42% to 39% in North America.
Device use also differs by generation. Globally, millennials made 20% of their online purchases on a smartphone, compared to 15% of the general population. In North America, the gap was 21% vs 14%. Young consumers additionally seek ways to cut delivery costs—46% of millennials globally use a practice called "freight forwarding" to save costs, compared 40% of the general population. Freight forwarding refers to using a third party to receive goods in the country of purchase. That third party then ships those goods to the consumer, which usually costs less than an individual delivery directly from the merchant.
"That's important for merchants that want to attract cross-border shoppers,” O’Malley said. “They may want a more optimized site or a native app rather than just a browser."
Merchants may want to consider ways to manage differences in language and currency in different countries when building their mobile apps, as well as enable price comparisons, O'Malley said.
Digital commerce companies working to accommodate more international shopping. Stripe, which provides technology for merchants to accept mobile and online payments, recently upgraded in anticipation of more international business. And WePay, which provides an application programming interface for online merchant communities, received venture capital in the past year to fuel its international ambitions.
Additionally, PayPal wants businesses to receive payments through Venmo, which was designed as a person-to-person payments app.
"Anytime you enable people to pay the way they want to, it's helpful," O'Malley said, adding the combination of a popular payment app with an emerging international payments trend can increase "stickiness."
Flywire has also noted the increase in cross-border shopping, though it says older generations are also a major catalyst.
"Just as millennials regard the world as borderless, today's 'global citizens of the world' are increasingly making purchases of high ticket goods and services, such as education, real estate, medical care, luxury vacation rentals, etc. that are unbounded by geographic limitations," said Rob Rosenblatt, chief customer officer at Flywire.
But the older demographic hasn’t fully adopted mobile for domestic or international payments. Millennials will be the first generation to do so but it's going to take continued consumer education, said Talie Baker, an analyst at Aite Group, adding that as recently as 2014, only 40% of millennials had used a mobile app to make a peer to peer payment.
"Most in fact were still using cash and checks for P-to-P transactions…what PayPal is doing with Venmo is really good but I think it could face some stiff competition from Apple, which already has a large base of consumers who trust Apple with payment credentials to make purchases," Baker said.