Gen Z not only possesses increasing spending power, but this demographic—raised in a digital environment—is vocal about their payment preferences. Younger consumers are more inclined to explore and adopt alternative payment methods, such as contactless payments or buy now, pay later services, in comparison to older cohorts.
Data from EY reveals that seamless experiences matter greatly to Gen Z. Even a single unnecessary step during the payment process leaves them dissatisfied. This extends to tasks like entering a PIN at the point-of-sale, with 39% of Gen Z respondents citing it as a pain point when using their debit card. In contrast, fewer (29%) older generations express the same sentiment.
When choosing between debit and credit cards, debit cards reign supreme among Gen Z consumers, with nearly 70% of respondents in this age group saying they use their debit cards on a weekly basis. The appeal of debit cards lies in their budget-conscious nature. According to EY, Gen Z is mindful of their spending and aims to not overspend, particularly to avoid late fees or other charges commonly associated with credit purchases. Although 51% of older generations report frequent credit card usage, fewer Gen Z consumers (39%) do.
Ultimately, loyalty plays a significant role. Gen Z consumers are decisive about their preferences, and if they don’t find what they seek, they’ll seek it elsewhere. In terms of payments, they have specific preferences, and if their preferred method isn’t available, they are more likely to delay the purchase rather than opt for an alternative payment method.
The Differences Among Generations
PSCU’s 2023 Eye on Payments research mirrors EY’s findings, indicating that Gen Z is embracing emerging payment technologies, especially mobile wallets.
“Nearly four in 10 respondents say they like to use a mobile wallet at the point of sale or when paying for something at a retail location,” said Tom Pierce, Chief Marketing Officer at PSCU during a PaymentsJournal podcast last year. “And particularly in the younger audience, at least 28% of older Millennials, younger Millennials, and Gen Zers say they like to use a mobile wallet a few times a week at the point of sale.”
In contrast, older consumers exhibit less enthusiasm for new payment methods and tend to stick with traditional payment methods. Unsurprisingly, PSCU’s research revealed that 96% of baby boomers prefer to pay via debit, credit, and cash.
Paying Bills Looks Different for this Generation Too
Gen Z’s payment preferences aren’t the only distinguishing factors setting them apart from older generations. This group also approaches the bill payment process differently. In fact, no generation experiences more stress about paying bills than Gen Z, according to data from ACI Worldwide. During a podcast early last year, Steve Mountz, Director of Product Marketing at ACI Worldwide told PaymentsJournal:
“When we asked consumers how they feel about the bill payment process, 31% of Gen Z found the bill payment experience stressful either always or most of the time,” Mountz said. “What’s more, 34% said they were nervous about whether or not they’re able to remember to pay their bills, and 49% said they get anxious. So, they’re generally stressed, anxious, and worried about whether they can cover their bills or pay them on time. We also see a high preference for in-person payments, which was kind of a surprise.”
“Maybe they’re making a huge tuition payment, and they have questions they want to ask before submitting it,” he said. “So they make those payments in person. We also see a lot of times that they want to pay in person at a third party like a Walmart or a Walgreens.”
Increased Spending Power
Given Gen Z’s substantial and growing spending power, businesses—particularly retailers and merchants—should take note. They need to make sure their point-of-sale terminals are equipped to handle diverse payment methods. Gen Z, having grown up with alternative payment methods expect nothing less.
While this may not significantly alter the landscape for online retailers, those with a physical presence need to prioritize the adoption of mobile point-of-sale technology and other innovative checkout solutions to streamline the checkout process. If businesses don’t adapt to the evolving payment preferences of Gen Z consumers, they won’t remain competitive nor meet consumer expectations. EY also recommends that payment providers streamline the checkout experience and remove any extra septs from the transaction experience.