The barrier to higher teen spending online currently is the need to have a credit card in order to make purchases online, ruling out under 18s. Datamonitor forecasts that new developments in online payment methods will open up this market to the teenage audience enabling retailers to tap into this lucrative demographic.
Prepaid or ‘stored value’ cards allow teens to shop online without having to rely on a partner or parent to make the purchase. This form of payment is being using increasingly by online retailers and is one of the reasons why Datamonitor predicts such a leap in online spending amongst the younger internet audience.
“Payment providers must take responsibility for the product that they are providing. In giving teens a card of any sort they are familiarising them with plastic. However, it is does not necessarily follow that they are encouraging a debt ridden society. Prepaid cards reinforce the idea of using plastic to pay for what you can afford, by only allowing transactions where there are sufficient funds loaded onto the card. Payment providers should encourage responsible spending behaviour. Some operators are doing this through the provision of money management information and tests on their websites. This helps reassure parents that these products can help their children learn about how to manage their finances,” comments Julie Cunningham, financial services analyst at Datamonitor.
Although their individual spend is relatively low, teenagers en masse have significant spending power. In addition to being net-savvy, retailers are realising that their low yet purely-disposable income is a valuable revenue stream and are developing ways to enable them to buy online. Datamonitor suggests that banks must step in to facilitate this or risk losing out to non-traditional financial services operators.
“There is a need in the market for a teen payment product that allows secure payments online. Teens are keen to have their independence and to shop online. Both traditional players and new entrants have a part to play in this market. New entrants can attract teens through the `cool factor’, while traditional players should use their established role in society as a way to convince parents and to gain their support. If traditional players ignore teenagers they face losing future, profitable customers and they will face an uphill struggle against new, `cooler’ brands,” added Cunningham.
