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Youth 12 Jun 2018

Generation Z is beginning to change the payment ecosystem

They were born with the dawn of this century, and many of them are the children of the first millennials. Generation Z is now beginning to impact payments, imposing their specific preferences.

There is no consensus about what they are called – although Generation Z is starting to become entrenched – nor about the date of their beginnings, though it is frequently stated that they were born from 2000 onwards. What is certain is that Generation Z or the “post-millennials” are being accepted as a reality and are the subject of university studies, newsrooms, and marketing departments.

Today they are still children or adolescents but soon they will have an enormous impact on society. We shouldn’t forget that – bearing in mind that when each generation starts and ends is open to debate – some studies believe that Generation Z is already the most populous generation in the United States.

What do they think, what expectations do they have, how can we capture their interest? Frequently characterized as a screen-addicted generation with reduced attention spans, addicted to visual social media like Instagram and Snapchat, some articles – like this one – vouch for their ability to filter and select stimuli in a matter of seconds, in an environment in which the wealth of information is infinite.

The recent study Driving the future of payments, produced by the consultancy, Accenture, dedicates a good part of its analysis to Generation Z, and although it finds a lot of similarities with millennials, it sees dramatic differences with their parents and grandparents. They don’t know a world without Google, Apple, Facebook, and Amazon, and the smartphone is like a third hand for them: 80% would give up television for a day in exchange for their telephone.

From the standpoint of finance, Accenture’s study stresses that this is a generation that is used to using banking applications: 69 percent use these apps daily or weekly as compared to 17 percent of baby boomers.  “This confirms a massive generation gap in accessing banking services that will continue to widen.” states the study.

One of the hallmarks of their identity from a financial point of view is the use of digital wallets on their smartphones, a tool that is so natural to them, they don’t see the point of carrying a physical wallet with notes, coins, and plastic credit cards.

“As a question of survival, this will force traditional institutions to improve the value proposition of their mobile payments.” asserts Accenture. And it is not merely a long-term question: the consultancy Juniper Research calculates that more than 1.6 billion consumers already use these kinds of digital wallets, and the figure will grow to 30 percent in 2019, exceeding 2 billion users.

As a result, digital wallets will be one of the main battlegrounds where financial institutions will vie for Generation Z customers. But there will be many other influencing factors such as the growing importance that the youngest consumers will place on payment loyalty programs.

“Younger consumers are demanding an exceptional digital payments experience on all platforms – most importantly on their smartphones – and want to be compensated through targeted rewards, offers and discounts” states Michael Abbott, a financial services expert at Accenture. Abbott predicts that Generation Z “will ultimately force traditional banks and payments players to either think beyond the functional aspect of mobile payment apps and create an engaging customer experience.”

Offers and alliances between companies and brands will be increasingly important to win over  a generation that, for now makes small payments – for a pizza among friends, for example – but who will soon be in the job market, shortly thereafter leading it. Payment providers won’t have an easy time attracting and keeping their attention, but at least they know their fundamental consumer trait: everything goes via the smartphone.

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