Gen Z adults (those aged 18-25) are the trendsetters for the evolving services and products provided by traditional financial institutions as well as entrepreneurial financial technology (fintech) firms.
There are 37.2 million Gen Zers aged 16-24 in the educational system, the labor force, or both. Over 19 million Gen Zers are working, and 20 million are in school. As reported in Packaged Facts´ new report Gen Z and Payments: The Next Big Cohort Is Here (July 2022), this generation’s cardable purchase volume was $559 billion in 2021, and is projected to reach $982.5 billion in 2026 and $1,437 billion in 2031.
The payment preferences Gen Zers are developing will inform their choices and providers for decades to come. Of course, these preferences will morph over time, but the selections they make and experiences they have now will not only frame their own future decisions, but influence the payment choices of older and younger generational cohorts.
As with the larger tech sector, the dynamism of the payments industry is reflected in both the constant tweaking of long-established products and the disruptive introduction of newfangled ones with seemingly few ties to previous iterations of financial services. Again as with the larger tech sector, the payments industry is characterized by sharp tension between gaining or protecting market share with entrenched products vs. developing novel product types that simultaneously tap and create new consumer demands.
An inherent challenge for payment product developers and marketers is tweezing out the behaviors and preferences of a young generation and trying to determine which reflect their stage of life and which reflect the unique attributes and characteristics of the cohort.
Payment preferences exist at the nexus of these issues. For example, almost twice as many Gen Zers say debit cards are their preferred method of payment as do Millennials. Do the youngest adults have an unusually high aversion to debt? Are they unique in their unwillingness to risk accruing credit card balances?
Or to what degree are they simply less familiar with credit card product offerings, given that they are the first generation in 40 years not offered pre-approved credit cards when they were in college? If the latter is a factor, will Gen Zers develop appetites for consumer credit as they earn more money and start dreaming about travel and vacations paid with frequent flyer miles?
Many of these answers will be determined by Gen Z’s long-term embracing of Buy-Now, Pay-Later (BNPL) installment financing, and whether BNPL alters or breaks the traditional relationship between age and credit cards.
For more information, see the report Gen Z and Payments: The Next Big Cohort Is Here, which provides a deep dive into the emerging trends in Gen Z’s relationship with financial service providers as well as their use of specific payment products.
About the author: Elizabeth Rowe is a financial/payment markets analyst for Packaged Facts.