According to new data released by Visa USA, an overwhelming majority of both Baby Boomers (79 percent) and Echo Boomers (74 percent) believe that our society will one day operate without cash and checks and will conduct all payment transactions electronically. Visa's study of generational spending preferences debunks stereotypes and highlights the impact and consequences of one generation passing the mantle of economic influence to the next.
Visa USA estimates by the year 2015, Echo Boomers and Baby Boomers will account for more than 50 percent of total consumer spending, $2.45 trillion and $4.6 trillion respectively. Currently, industry estimates show that Echo Boomers are responsible for $0.4 trillion in annual spending compared to $3.8 trillion by Baby Boomers.
"These two generations are the powerhouses of U.S. consumer spending," said Wayne Best, Visa's chief economist. "The shift in economic power from the Baby Boomer generation to the Echo Boomer generation will have significant implications across all retail categories. While Baby Boomers will remain a force even into their golden years, the rate at which Echo Boomer's spending will increase is a testament to their future economic impact."
To better understand this generational shift in spending influence and what that will mean to the future of the U.S. economy, Visa USA commissioned a survey of Echo Boomers (18 to 28 years old; born 1979 to 1989), and Baby Boomers (43 to 61 years old; born 1946 to 1964), entitled "How America Spends."
Generational Stereotypes Do Not Apply To Spending
Previous installments of Visa's "How America Spends" study have revealed unique insights into the spending attitudes and behaviors of America's largest and most influential generations - Echo Boomers and Baby Boomers.
Findings reveal that younger consumers between the age of 18 to 28 are defying conventional wisdom when it comes to stereotypes often associated with their generation. According to the study, Echo Boomers are demonstrating a more practical and mature approach to spending beyond their years, they view spending as a way to give back to others, they prefer retail categories that help relieve feeling time-stretched and look to older generations for buying cues.
* Nearly half of Echo Boomers (48 percent) describe themselves as savers.
* Even at their young age, more than 70 percent of Echo Boomers are concerned about having enough money for retirement, a degree of concern similar to the about-to-retire Baby Boomers (78 percent).
* 88 percent of Echo Boomers like to buy things for others more often than buying things just for themselves.
* Echo Boomers cited dining out at restaurants as their second largest expense (45 percent), after housing costs (69 percent) in a given month.
* Echo Boomers said their spouses (70 percent), children (63 percent) and parents (48 percent) had the most influence on their spending.
* 37 percent of Echo Boomers believe older generations have an influence on their spending behavior.
Baby Boomers, on the other hand, have largely negative views of Echo Boomers, they tend to misunderstand their younger counterparts and as they leave the workforce and age, are beginning to spend according to their life stage.
* Only 25 percent of Baby Boomers describe the Echo Boomers as an admirable generation compared to 68 percent of Echo Boomers who admire Baby Boomers.
* Approximately 68 percent of Baby Boomers believe Echo Boomers are too self-centered and focused upon themselves
* Baby Boomers cited medical and dental costs and going out to restaurants as their largest expenses (45 percent and 42 percent respectively), after housing (75 percent).
* When it comes to splurging, Baby Boomers most often spend on their children or grandchildren (34 percent) and on vacations (16 percent).
* Baby Boomer's spending is primarily influenced by their spouses (63 percent), rather than their children (36 percent) or parents (34 percent).
* Only 15 percent of Baby Boomers believe the younger generation is capable of influencing their buying cues.
The Migration to a Cashless Society
More and more, consumers are relying on their payment cards for purchases that were once only possible using cash, checks or coins. Innovations in technologies and products are facilitating the transition to a cashless society. Evidence of the migration away from cash and checks includes:
* Debit: More than three-quarters of adults in the U.S. have a debit card, according to The Nilson Report, a leading industry analyst publication, and the Federal Reserve Bank reports that debit cards are the fastest-growing payments type at retailers nationwide.
* Government Migration: More than 30 states, including California and Texas, are saving millions of taxpayer dollars by switching from cash to Visa reloadable prepaid cards to disburse child care, unemployment, and other social benefits.
* Contactless and Mobile Payments: Visa implemented a contactless platform that has the flexibility to accommodate a wide range of products, including credit, debit and prepaid, as well as a nontraditional forms of payment such as mobile phones and handheld devices.
Marketing the Migration
Prior to the introduction of the Visa Check Card, less than two percent of Americans used a debit card. In 2006, Visa debit products generated more than $600 billion in consumer spending.
To help communicate the benefits of paying with plastic, Visa has aired four national television commercials in the past six months, including "Lunch," "Lawn & Garden," "Morning in Manhattan" and "Food Court," that illustrate the convenience and efficiency of paying with a Visa card. In each spot, one consumer attempts to pay with cash or a check and ultimately disrupts the harmony of life.
"Consumers' payment preferences have evolved. Recognizing this growing opportunity, our advertising campaign highlights the shortcomings of cash and checks," said Kevin Burke, head of marketing, Visa USA. "As consumers look for payment options that enhance their everyday life, we'll continue to use a variety of channels and techniques to reinforce the benefits of Visa payment options that empower cardholders."
How America Spends
How America Spends was conducted by The Segmentation Company (TSC), a division of Yankelovich, between February 22, 2007 - March 12, 2007. The study included 1,000 interviews (500 Echo Boomers; 500 Baby Boomers) via telephone using random digit dialing (RDD). Survey results are nationally representative, and the margin of error for each generation group is ± 4.5 percent.