For the last decade or more, marketers have been chasing the prized millennial market. But the next cohort has arrived—Generation Z—and they’re set to shake things up in almost every sector, including payments.
Classified as the cohort born after 1996, Generation Z will surpass millennials as the most populous generation this year, comprising roughly 32% of the global population, according to research from Bloomberg. With the eldest in their early 20s, Gen Zers are starting their careers and their spending power is growing every year.
To win over this lucrative group of consumers, financial services and payments companies will have to decode Gen Z and their views on payments, and create products and services tailored to their unique needs. Here are three key insights to help you get started:
1. Gen Zers have a mobile-first mindset, so payments companies should too.
While older millennials will remember using dial-up internet and landlines, Generation Z grew up with mobile devices and instant access to information. They may get a bad rap for being glued to their phones, but they truly are attached to them. In fact, 80% of Gen Zers would give up television for a day to stay connected to mobile, and 30% would give up friends, according to Bank of America’s 2017 “Trends in Consumer Mobility Report.” On average, Gen Zers use their smartphones 15.4 hours per week—more than any other type of device, according to Vision Critical.
The implication for the payments sector isn’t just the obvious one: go digital with products and services (more on that below). Providers must design everything—from their websites to their marketing to their communications tools—with a mobile-first or even mobile-only philosophy.
2. As Gen Z ditches physical wallets, it’s time to up the ante on digital wallets.
Gen Z is more interested in digital payments products and services than any other generation, according to the “Banking and Payments for Gen Z” report by Business Insider Intelligence. More than half use digital wallets monthly and over three-quarters use other digital payment apps or person-to-person (P2P) apps monthly.
In the report, “Driving The Future Of Payments,” Accenture states that Gen Z is likely the first generation to forgo the leather wallet for the digital wallet. But they’re not just looking for convenience—they want their mobile wallets to “think for them.” One example would be a wallet that automatically chooses the card that offers the best rewards or savings, notes Accenture. Whatever the innovation might be, products and services that deliver speed, convenience and seamlessness will resonate with Generation Z.
3. Gen Zers worry about money, and payments providers can help.
Shaped by the 2008 financial crisis, Gen Zers are fiscally conservative and more pragmatic than millennials, who have taken on massive student loans and credit card debt. A U.S. study by The Center for Generational Kinetics found that 29% of Gen Z believes that personal debt should be reserved for a few select items and one in five believe personal debt should be avoided at all costs. In a survey by the American Psychological Association, 81% of Gen Z said money was a major stressor for them, compared to 64% of all adults.
For payments companies, Gen Z’s money mindset presents a prime opportunity to help eliminate their unease and educate them about finances. In fact, young consumers are thirsty for financial knowledge. Accenture notes that 70% of both Gen Z and millennials are interested in digital payments advisory and expense management services that can give them a better understanding and control of their personal spending. These services also coincide with the trend towards offering customers experiences—not just products. “Next-level customer experiences matter more than ever,” states the Accenture report. “Experiences that align not just with how people pay, but with moments of influence in their lives. To deliver, the industry must design payments experiences around human needs.”
As all signs point to, resonating with the next generation will require next-generation solutions. However, the clock is ticking and the Gen Z market will mature before we know it. Payment providers who start to think of new approaches now will undoubtedly see dividends in the future.
