Gen Z consumers, who are roughly between the ages of 12 and 27 years-old, have their own distinct preferences in how they choose to pay for services and goods.
It’s become clear that they have a penchant for all things digital, and that carries over to the payment methods, but some of the generation’s payment choices and behaviors related to them are surprising, according to a payments specialist who studies their habits for the consulting firm EY.
Jochen Kaempfer, an EY principal focused on payments and banking, spelled out in an interview this month the ways in which he found the results of a Gen Z survey by the consulting firm surprising. Results of the survey, which queried 1,200 Gen Z consumers in the U.S., were published in January.
Editor’s note: This interview has been edited for clarity and brevity.
PAYMENTS DIVE: What did you learn from the recent EY survey of Gen Z’s payments habits?
JOCHEN KAEMPFER: They have a huge focus on new, or what you could call alternative payment methods. If you think about peer-to-peer (P2P) payments, they have almost twice the usage on a weekly basis. If you think about in-game currency — your typical sort of multi-player ecosystems, they have four to five times higher usage, almost double digits of those who use it on a weekly basis. If you think about buy now, pay later, they use it three to four times as much.
Wouldn’t you have predicted more use of those alternative payments tools from that digital generation?
Yes, but I was surprised by how much more. If you add up the numbers, in terms of how many people that will be in the U.S., they are massive numbers.
What else did you observe?
The other one that is quite interesting is their use of credit cards and debit cards, when it comes to usage as well as preference. Gen Z use credit cards far less and consider it as their preferred method far less frequently than older generations.
Should the card industry be worried then?
It is really hard to stand up a payment ecosystem...If you think about credit cards, they are super highly penetrated in the U.S., both on the consumer side as well as on the business side...also as those Gen Zer's get older, will their behaviors look more similar to Millennials today. At some age, do they start using credit cards, maybe it's later, maybe it's lower, but to some extent, as people get older and need access to more lines of credit to purchase a house or bigger purchases, that is the change we see to some extent.
Why do you think that is?
Quite amusingly, Gen Zers consider themselves more qualified than other generations to get a card. They think ‘I would get a credit card,’ or they already have a credit card, but they don't use it or don't want to use it.
Do you think there’s more to it than that?
Two things stood out to me. The first thing is their lack of understanding of the product, almost 15% of Gen Zers said, ‘I do not fully understand that product.’ The second thing is about 30% said that their parents, spouse or another person handles their finances. So Gen Z is not really taking care of their finances, or not fully managing their finances.
What other payments preferences are they displaying?
With buy now, pay later (BNPL), there is meaningfully higher usage with Gen Z, but when it comes to in-store purchases, actually non-Gen Z drives a lot of the buy now, pay later purchasing, whereas with Gen Z it's mostly e-commerce related or in-app. Non-Gen Z generations have actually started to adopt (BNPL) quite meaningfully, but in an in-store or point-of-sale setting.
What other attributes did you see to their payment choices?
On use of personal data and privacy concerns, Gen Z, surprisingly to me, is less worried about those issues than older generations. I think in other surveys we had found the younger generations actually are more aware of data and privacy, but they seem to care less about it in this instance, at least in the context of payments. When it comes to environmental, social and governance (ESG) concerns, Gen Z seems to care meaningfully more about it, more than 50% considered ESG at least somewhat important when selecting a payment provider.
How devoted are they to their payment choice preferences?
In response to the survey prompt ‘if my preferred payment method is not available, I will use another payment method,’ we saw that Gen Z is 50% more likely not do that. So they will delay the purchase if their preferred payment method is not available.
