Payments Innovation

Why Digital Payments Innovation Sticks To Gen Z

How Gen Z Is Driving Payments Innovation

Things move fast – perhaps too quickly at times – in payments and commerce. A fresh sign of that is how much focus is turning toward the emerging consumer group known as Generation Z.

Gen Z is growing up. The oldest members of the generation born between the mid-90s and the mid-2010s (specific year ranges vary depending on who is supplying the figures) are graduating from college, getting their first jobs and starting to form relationships with credit products.

Making the most of those relationships served as the foundation of a new PYMNTS interview with Matthew Carpenter, senior vice president, market director for Elan. And it’s not only credit products that are in play, he said.

Peer-to-peer (P2P) payments and mobile wallets, among other payment methods, are gaining traction among Gen Z consumers, which means banks, credit unions and players in the payments space need to up their game to best serve those younger shoppers and financial services users.

Indeed, he told PYMNTS, some 75 percent of Gen Z consumers use P2P products every month. And as PYMNTS has reported, P2P services such as Venmo and Zelle continue to grow and expand into new and value-added services.

For starters, Zelle’s Q3 results showed that its year-over-year payment values increased by 58 percent, while transaction volumes rose by 73 percent. For its part, Venmo now has an option to transfer money to the bank without a debit card for the same fee. The standard bank transfer – which is free, and takes between one and three days – is still available.

Payments Stickiness 

“These companies have reached a level of stickiness with consumers,” Carpenter said. And there is a credit card angle, too, which will apply to dealing with Gen Z users of P2P going forward.

“Most of these P2P players still allow consumers to use credit cards to fund these transfers,” he said. That means credit card programs, in order to appeal to Gen Z consumers, must offer such integrations in a seamless manner, along with other features Gen Z has come to expect.

Broadly speaking, it seems the follow-up act to the millennial generation – that is, Gen Z – is much more positively inclined toward using credit products of all stripes. The percentage of credit card-eligible Gen Zers who carry a balance increased by 41 percent between Q2 2018 and Q2 2019, according to a recent report from TransUnion, reaching a total of 7.75 million. That is a much more active rate than what is seen in older generations during the same time period. Far more millennials and Gen Xers make use of credit cards than Gen Zers – at 38.29 million and 38.27 million, both cohorts have roughly quintuple the carrying rate. But the growth is much slower – 5 percent and 3 percent for millennials and Gen Xers, respectively.

The payment issues regarding Gen Z, of course, go well beyond credit card programs. Mobile wallets and other forms of digital payments are also important to this consumer segment, which has pretty much grown up using them.

In fact, PYMNTS research indicates that consumers are not only increasingly comfortable using smartphones as financial management tools, but they seem to regard them as indispensable for this purpose. This is especially the case for younger generations. More than 90 percent of Gen Z consumers – those aged 18 to 21 – report having downloaded card apps, compared to 24 percent of Baby Boomers and seniors. Younger consumers also report being more enthusiastic about numerous app features, including fingerprint login.

Gen Z Trendsetters

This is important, because younger consumers tend to be trendsetters when it comes to the adoption of new technologies. Their early adoption suggests that interest in mobile card apps will only grow in the years to come. At the same time, younger consumers can also be fickle. This underscores the need for issuers to make card apps as compelling as possible, lest the consumers move on to the latest, greatest app to come along.

But success requires hard work – not just a reliance on demographic trends. “To gain traction,” Carpenter told PYMNTS, “(payment services providers) will have to start thinking of other features” in order to keep Gen Z loyal to specific mobile payment offerings. That can include such features as mobile wallet support, instant digital issuance of cards, easier integrations and even more “transaction-based lending functionality,” he said.

Even so, loyalty and rewards – relatively traditional payment offerings – will continue to show dominance among Gen Z consumer preferences, Carpenter noted.

“Gen Z is now at the point of their lives where they are having to make pragmatic financial decisions,” he said. The key to reaching them comes down to one ideal: “They want something simple that also has value.”


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.