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How to Tailor Your eCommerce Payment Options for Teenage Customers

by Today's Eggspert

There’s an ecommerce audience that doesn’t get talked about much, but they’re buying online in massive and ever-increasing numbers. More than three-quarters of them buy online regularly. They flock to major brands like Amazon, but there are ways you can get in on the action too.

Interested?

I’m talking about young people.

Under-18 teens are one of the most ecommerce-savvy populations out there – unsurprising when you consider that a person who’s 17 this year literally can’t remember a time without the internet.

‘They are the first generation to always have the internet at their disposal. They grew up in a world that is seamlessly connected,’ as Practical Ecommerce’s Marcia Kaplan observes.

By the time they were 8, the iPhone was already out – maybe that’s one reason why teens rely so much on mobiles to access the web, though there are other obvious reasons.

First, how much of an ecommerce audience are teens?

The U18 Teenage eCommerce Market

Nearly 70% of teens bought online as far back as 2012, when ecommerce was hardly off the ground by today’s standards.

Back then, online buying was even more dominated by educated and high-income buyers. That was especially true among teenagers, and it still is: this is an audience with diverse interests, instinctive digital communication skills and money to spend. In 2016-17, they spent around $2,500 a year online each.

They split slightly different by gender: 86% of teen boys bought online in 2014, compared to 76% of teen girls. That’s still a huge majority. The number of male buyers grew faster too – it’s up 8% in the two years from 2012, compared to a 4% rise among girls during the same period.

Where they shop

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Over the years 2013 – 2016, the proportion of US teens who favored Amazon over other online stores rose significantly, while usage of major branded sites and eBay flatlined and then fell.

preferred shopping sites

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Although this graph shows Nike losing market share to Amazon, what’s really happening is that Amazon is hoovering up teen market share from all apparel brands. Within the apparel and footwear sector, Nike remains dominant with Adidas growing fastest, says CNBC, citing research from Piper Jaffray.

Amazon’s popularity as a destination for teens is underscored by the fact that it’s the second most popular app for teens, just after Snapchat.

While that picture might seem bleak for smaller etailers, in fact the true picture is the opposite: teens might use Amazon a lot, but they use it less than the general population, at least in the US: Last year, CNBC reported that 55% of shoppers began their shopping search on Amazon.

Teens’ Amazon use might partly be dictated by payment options: Amazon gift cards are far easier for under-18s to access than conventional credit or online payment options, meaning teens might be shopping where their money’s good rather than where they like to shop. eBay, for instance, won’t give you an account if you’re under 18.

If that’s the case, etailers who want to target the teen audience should benefit by accepting more alternative forms of payment, especially gift cards.

The teen audience for etail is growing, in reflection of the general trend that the younger you are, the more likely you are to shop online:

How the generations shop

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Increasingly, the adolescent market is moving fully online. It’s one major reason why American malls are contracting. Stores are reacting: rue21 is the latest of America’s mall superstars to close all its bricks and mortar stores – 400 nationwide – to focus on online sales.

When they do shop online, teens are far more reliant on mobile web access, particularly smartphones.

As we’ll find out later, that’s partly down to wanting to take control of their shopping habits on their own devices, and it calls up some ethical questions. (In 2017, 81% of teens surveyed expected their next phone to be an iPhone, the highest number ever.)

But it’s partly because they’re simply more familiar with mobile, more comfortable with it.

This data refers to millennials, rather than under-18s, but again, we can extrapolate from the trend.

When Americans shop

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Millennials are more likely to shop in the bathroom, in bed or in the car than any other American generation; only Gen X shops more than they do in store. If that trend continues down into ‘generation Z’ or today’s 16 and 17-year-olds, most of your custom from that group is coming casually via mobile.

They’re also most influenced by social influencers including on Facebook and Youtube: 53% of females and 52% of males indicated that social media impacts what they bought online in 2013. Facebook was the most important channel reported then.

How Do Under 18s Make Online Payments?

Under-18s can’t access credit. But many debit cards can be used to make purchases online: anything that doesn’t require a credit card for age verification purposes can usually be bought with a debit card. Bank of America allows teens to open a checking account with a debit card at 16; other institutions vary, but many banks will open checking accounts for teens with parental co-sign at 14. That makes sense in financial terms too: while many teens who buy online are part-time employed, 63% are partially subsidized by parental contributions.

Buying online with a credit card is pretty simple; debit cards, not so much. If you approach online purchase without credit, you’ll find some outlets will sell to you happily and others will decline your payment, sometimes without explanation. Of the debit cards available to under-18s, Visa is reputedly the most reliable.

Alternatively, teenage consumers can buy using Paypal accounts backed by a debit card; so long as there is money in the checking account or Paypal account to pay for a purchase and no credit card is required for age verification, this method will work for most online purchases. It should be noted that Paypal’s ToS mean no-one should be using it until they’re 18.

In India and South-East Asia, the commonest preferred ecommerce payment method is cash on delivery (COD). For all age groups combined, it outstrips credit, debit and store gift cards:

India payment methods

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Purchases made online can be paid for when they’re delivered, so there’s no age verification process attached to the payment system itself: anyone can use cash. It’s very popular in the Arab world and increasingly finding favor south of the US border too.

If you have a customer base in Mexico, the UAE, India, Indonesia or elsewhere in the developing world, this makes a difference to how you structure your payment process. But for most US-oriented businesses, it’s not relevant – cash on delivery barely exists in the USA.

Finally, teens are resourceful. They figure out how to circumvent obstacles to online purchase, just like they get around other restrictions. Their methods can be quite inventive – here’s iamsekc14 explaining a few workarounds:

(Not saying I recommend these, just that teens have their own way of getting around some of the restrictions in place.)

We reached out to Lunaria Moon, who runs the Only Fun Things blog and, at college age now, remembers her own teen years buying online.

Luna says she bought online with iTunes gift cards. ‘Amazon was synced to my debit card, though,’ she went on, explaining that ‘when I was still under 18 I used a debit card my parents got me. It was technically under their name.’

That backs up the idea that teens gravitate to Amazon because their money’s good there. And they can earn it themselves in ways that aren’t totally traceable.

Many teens earn money using so-called ‘beer money’ sites that let them perform simple tasks, often related to marketing research, in return for small sums of cash in the form of gift cards. Swagbucks.com, one of the more popular sites in the space, gets TK traffic per month. It breaks down like this, according to Alexa:

Gender education location

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While female users being heavily overrepresented compared to the rest of the net might not be significant, there’s a massive skew to ‘no college’ and ‘some college,’ and a huge number of users use the site from school. The site’s minimum user age is just 13, and users can collect their payment in the form of gift cards for Amazon, Steam, Walmart, Paypal and others – including a virtual Mastercard.

Gift cards

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While Swagbucks users can be as young as 13, users report that they don’t get many surveys offered to them if they say they’re under 18. According to one Reddit user:

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(Marketers, read it and weep.)

The bottom line: two-thirds of teens will pay partly or wholly with their parents’ money, but many more will acquire their own and gift cards are one of the more common forms.

What does the law say?

There are some downsides to selling to under-18s. First, as a rule, no contract with an under-18 is binding in law. You essentially can’t make an enforceable contract with a minor. They can’t be held to their word the way a legal adult can.

That means an under-18 purchaser can back out of their agreement to buy whenever they like, with no comeback for the merchant – which is why eBay forbids under-18s from using the service.

Obviously, age-restricted items are age-restricted, though the specific restrictions depend on location.

Other than this, the law doesn’t have much to say about selling to teens online.

How Can You Optimize Your Checkout Process For Under-18s?

Optimizing the checkout process for under-18 payments takes two forms: gearing up for the specific payment methods U18s are likely to use, and setting up a checkout flow that U18s aren’t likely to bounce from. (The good news is, changing your checkout flow to better suit under-18 purchasers will probably suit your other customers better too.)

Checkout flow: optimize for mobile

The under-18 buyer is a mobile buyer. Nail your mobile checkout flow. In practice, this means:

  • Slash scrolling where possible. Scrolling on mobile screens is awkward. It’s better to use more screens and less scroll if you can.
  • Use expandable accordion menus, not links, for FAQs and delivery. Keep shoppers in your checkout flow, not bouncing around your site in new tabs.
  • Guest checkout. You should have this everywhere, but especially on mobile!
  • Big, bold text fields. No-one wants to input 9px type with their thumbs. Stack them vertically for improved ease of use.

There’s a great, detailed post on designing checkouts for mobiles by Kunle Campbell here.

Payment: Optimize for debit card and prepaid

Most of your customers won’t be as wily as iamsekc14. Under-18 buyers do their buying with debit cards, Paypal, prepaid cards and gift cards.

Paypal is simple: If you’re under 18, you shouldn’t be using it. Many teens open Paypal accounts anyway, but they’re not supposed to and if you want to ethically orient your online store towards teens specifically, you shouldn’t build it around Paypal.

Debit cards without Paypal are tougher to accept

Shopify Payments accepts Visa, MasterCard, and Amex debit cards in Canada, the United Kingdom, Ireland, and Australia. In the United States, it also accepts JCB, Discover, and Diners Club debit cards. But there are some exceptions, and you’re largely at the mercy of the bank’s own network. Shopify Guru Kris warns that debit-card only accounts ‘do not have the system to support these types of purchases, which results in a declined transaction.’

For third-party payment gateway providers, the picture is roughly similar. Some payment gateways like BluePay specialize in debit card payments, and they offer OpenCart, Magento, WooCommerce and ZenCart integrations amongst others. Otherwise, it’s difficult to accept online payments from debit cards issued outside the big credit card networks like Visa.

What about gift cards?

Gift cards are a common way for teens to turn cash into online credit: buy yourself an Amazon gift card at Wal-Mart and you have an online purchasing tool. Some teens do this to spend money they’ve earned from ‘beer money’ sites; many will do it because they get paid their allowance, or wages from their job, in cash. And of course, store gift cards are common presents for teens too.

You can set up your ecommerce store to accept the most common forms of gift card as payment. Amazon Pay will let you accept Amazon gift cards as online payments, though you should note that you’ll need a US street address, US business tax details and a US phone number as well as your business credit card handy. For details on the setup process, check out Amazon’s guide here, or check out the instructions for:

It’s significant that one of the most popular stores among under-18s, Forever 21, allows only Visa and Paypal payments.

Forever21 payment method

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This suggests that the store isn’t consciously targeting the teen audience. However, Visa gift cards are another popular option for teens. Many ecommerce businesses refuse these, and it’s not always apparent from their checkout whether they accept them or not. If you’re willing to accept them, you could give yourself a slight edge.

Conclusion

If you want to sell to teens, their money has to be good in your store. Consider accepting as many types of payment as you can, but focus on gift cards, debit cards and Visa. Being able to accept Amazon gift cards is particularly important!

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