“No Credit Card” Is the New Credit Card

Could paying with a credit card become a thing of the past? Data from NPS Prism^SM, Bain's customer experience benchmarking service, shows that over the past year alone, the percentage of US consumers younger than 25 who don’t use a credit card grew by 83%. In fact, when considering the breakdown of market share by credit card, the percentage of young consumers without a credit card now exceeds even the most popular provider.

Concurrently, many young Americans are using payment alternatives, such as digital wallets and “buy now, pay later,” at a much higher rate than older generations. As this younger cohort ages, the adoption of payment alternatives is poised to grow. And this trend could contribute to a continued decline in credit card usage: Today, only about 30% of consumers use a credit card to fund their digital wallets.

Many signs seem to indicate that plastic cards will go the way of DVDs. For traditional card issuers aiming for a Netflix-style evolution, it will be critical to adapt to younger consumers’ preferences, such as an easier, faster set-up process, and to carve out their own space in the digital payments market.

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One factor could delay the disruption: Consumers using digital payment alternatives encounter twice the number of problems in-store as they do online, from the app crashing to navigation difficulties to login issues. To increase adoption, alternative payment providers will need to guarantee a flawless user experience at physical stores.

If providers succeed in mitigating these issues, payment alternatives will pose a major threat to credit cards. Leading fintech investors can continue to follow trends closely and act quickly to gain a first-mover advantage.

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