May 23, 2007, 12:00 AM

Age makes a difference in how consumers pay online

Younger shoppers are more likely than older consumers to pay online with a debit card or a peer-to-peer service like PayPal. And younger adults see talking as just one of the things you can do with a mobile phone.

Younger shoppers are more likely than older consumers to pay online with a debit card or use a peer-to-peer service like PayPal. And most of them see talking as just one of the things you can do with a mobile phone, according to a recent report from JupiterResearch.

The report found online shoppers between the ages of 18 and 24 were nearly as likely to pay online with a debit card as a credit card, whereas those 35 and over preferred credit cards by a margin of 37%. For those between 25 and 34 credit had a 16% edge over debit, according to the report, entitled “Payment Preferences Online: Managing the Generation Gap Between Younger and Mature Adults.”

Three times as many online users between 18 and 24 who had purchased online reported never paying with a credit card as did online shoppers 35 and over. The report’s author, Edward Kountz, predicts younger consumers will pay with credit cards more as they age and earn and spend more.

He also predicts they will make more use of other ways of deferring payment for online purchases, such as Bill Me Later, which extends credit for purchases without a card account. The 62 million online shoppers between the ages of 18 and 34 will account for $34 billion, or 29%, of the $116 billion in online retail spend in 2007. And the spending of this age group will increase at a compound annual growth rate of 12% over the next four years, compared with 8% for the spending of adults 35 to 49, JupiterResearch predicts.

The survey also found that 34% of online users between 18 and 24 said they sent money electronically to a friend using PayPal or another peer-to-peer service in the past 12 months, versus 27% of those 25 to 34, and 27% of all online users.

Young consumers are more likely to make purchases with their mobile phones, the report says. While 74% of online users with a mobile phone who are over age 55 use the handset only to talk, that’s true of only 15% of online users between 18 and 34. 34% of cell phone owners ages 18 to 34, and 37% of those ages 25 to 34, say they have purchased premium mobile phone content, compared with 5% of online users 55 and over.

“Familiarity and comfort with today’s low-value digital content purchases will provide the clearest bridge to targeting a potential user base for more advanced payment services initiated using the mobile handset,” the report concludes.

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