Gen Z prefers Cashless payments

Generation Z Is Coming of Age, Cashlessly.
What that means for disbursement solutions

They split bills using Venmo and have eagerly adopted mobile wallets. Gen Z may be the first wave of newly minted adults for whom traditional payment methods feel truly passé.

Defined as anyone born after 2001 (or 1996, according to some sources) and comprising 32 percent of the global population, members of Gen Z are now entering college, making purchases, and establishing themselves as the consumer demographic to watch. They’re also financially savvy, appearing to lack the naivete that characterized other generations’ coming-of-age moments.

But what makes this group such an interesting challenge for payments innovators in the disbursements space?

For one, Zers have exacting standards. From rebates to incentives, they’ve set a high bar for brand engagement and frictionless technology. So, they may view options like real-time payments as more of a necessity than a perk.

The generation as a whole may also be more frugal and risk-averse than their predecessors. They grew up during the uncertainty of the Great Recession, potentially watching their parents struggle to make ends meet. Pragmatism and economic security are key values for this age group, according to a study by McKinsey & Company.

A connected experience, sans friction

As digital natives, members of Gen Z are also more likely to be at home with a cashless future. In fact, these young consumers don’t necessarily split hairs over digital vs. real life experiences. Per the McKinsey study, Gen Z may be less concerned with boundaries and categories than previous generations. The rise of digital payments means that everything from receiving a refund to tracking customer loyalty points are less tied to any one physical location or device. This could suit Gen Z’s style, since these players are comfortable with everything from virtual reality to friendships that thrive entirely in the online world.

According to a study by the National Retail Federation, Gen Zers are also less tolerant of friction in their online and mobile activities. Having never known life offline, they’re the experts on living technology-enhanced lives. A clunky refunds experience or an overly complicated rebate process could turn off these consumers, since they have high expectations on the UX end.

The generation also demands transparency, McKinsey noted. Since Zers think deeply about ethics and are savvy about privacy, they want to know when and how retailers use their personal information. According to Business Insider, they may appreciate when their data is used to suggest personalized offers and recommendations, or to provide education related to their behaviors and concerns. And whether they’re paying or being paid, this group is likely to insist on clear and straightforward payment processes that meet their high standards for trust and integrity.

Building trust through seamless payments

What about Gen Z’s brand engagement behaviors and customer loyalty? This group is shaping up to present different challenges than Millennials, according to a study by Lab42. Zers are less likely than their older siblings to engage with brands on social media, and less than half said loyalty programs motivated their purchasing decisions.

In fact, Zers are more likely to shrug at the notion of brand loyalty. Just 36% of this generation said they felt loyal or strongly connected to any brand. And when brands don’t deliver on promises or honor user preferences, these young consumers are quick to look elsewhere.

So what’s important to Zers? Offering a seamless experience and the perfect lifestyle fit, for starters. Zers value authenticity, engagement on their own terms, and zero friction. Enabling instant, seamless payments is a key part of winning their trust and loyalty. That’s especially true for consumer incentives programs that aim to drive habit-forming behaviors. In other words, a coupon or rebate could hold more weight if the experience is user-friendly.

The data-driven way to Zers’ hearts

These teens and young adults want to be engaged; they’re just digitally street-smart, and therefore more selective about the platforms and brands that deserve their attention.

Behaviors and values for this generation suggest that when it comes to getting paid, Gen Zers will hold employers, service providers, and their favorite brands accountable for honoring their payment preferences. These preferences are likely to include speed, security, and seamlessness – all key attributes of a successful digital payment experience.

Gen Z also represents a ripe opportunity for brands to offer data-driven products and services, including customizable payment experiences that serve as positive customer service touchpoints. Even issuing a refund could be an opportunity to make an impression on young consumers, who are more likely to value the ease and flexibility of the experience.

As Zers prove more conscious than ever of managing risk, building trustworthy relationships, and maintaining high standards in marketplaces both online and off, companies must perfect the payments ecosystem to offer value and service at every step.