Gen Z and Payments: The Next Big Cohort Is Here

 
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Published Jul 8, 2022 | 109 Pages | Pub ID: LA17292237
Gen Z and Payments: The Next Big Cohort Is Here

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In 10 years, Gen Z will be the largest American generation and as with previous generations, product developers and marketers are tasked with determining which of their current behaviors and preferences reflect their youth and which reflect the unique attributes and characteristics of the cohort.

In the payments space, consumers have typically turned to credit cards as they age and their incomes rise. Millennials, Boomers and Seniors all migrated from debit cards - pay-as-you-go products - to credit. However, Gen Z, much more than Millennials at the same age, appears less willing to abandon debit and short-term buy-now, pay-later (BNPL) installment loans (with low or zero percent interest rates) as their tools for purchasing and financing purchases.

The youngest adults are raising the bar for payments and financial services providers by demanding more versatile and nimble payment options and are comfortable using fintechs as providers of the products and services they use. Its members are embracing household finances management by debit card transactions as well any card product that offers cryptocurrency as either a reward or that lets them spend crypto in online or in-person transactions.

Gen Z adults have lost financial ground in the past year as real average hourly earnings decreased 3.0% from May 2021 to May 2022. That lost ground will have an ongoing impact on their incomes for the next 10 years. But while Gen Z is not as wealthy now as its members had hoped and are certainly not as wealthy as they will be in their 40s and 50s, they are the standard bearers for the services and products required from financial technology (fintech) firms, as well as traditional financial institutions.

The payment preferences they develop now will inform their choices of products and providers for years to come. Of course those preferences will morph over time, but the selections they make now will have coattails and will inform their future decisions while also swaying the payment choice of older cohorts and becoming the baseline for Gen Alpha (the generation younger than Gen Z).

“Gen Z and Payments: The Next Big Cohort Is Here” lays out the demographic characteristics of the most diverse generation in U.S. history and provides statistics and analysis of the group’s current and future households, income and spending. It provides a deep dive into the emerging trends in Gen Z’s relationships with financial services providers as well as their use of, and preference for, specific payment products.

Report Methodology

The information contained in this report was obtained from primary and secondary research. Primary research included proprietary surveys from the MRI-Simmons Winter 2021-22 Survey - “Attitudes about Financial Services - Gen Z vs. Other Generations” as well as a proprietary Packaged Facts national online consumer survey fielded in August-September 2021 that measured usage rates of consumer credit products. Both of these surveys analyze a sample size of 2,000 adults and are census representative of the primary demographic measures of age, gender, geographic region, race/ethnicity, and household income. Within the report, additional consumer surveys from other market research firms are referenced and cited as are data from payments participants.

Secondary research includes general business and trade publications, management consulting reports, investment analyst reports, company financial filings, and vendor-generated survey findings. Research also relies on U.S. governmental, non-profit, and not-for-profit trade reports, and payment system analysis.

  • Scope and Methodology of Report
    • Scope of Report
    • Report Methodology
  • Executive Summary
    • Why the Market Is in Hot Pursuit of Gen Z
      • Payments Are a Key Product for Building a Relationship with Gen Z
      • Fintechs, Big Banks and Big Tech All Want Gen Z
      • Which Gen Z Preferences Reflect Their Youth? Which Ones Their Uniqueness?
    • Gen Z Adults
    • Gen Z and Payment Cards
      • Gen Z Have Relatively Lower Credit Card Usage
      • Gen Zers Are Somewhat Less Confident About Credit Card Issuers
      • Gen Z Spends Less than Other Groups When They Use Credit Cards
    • Gen Z and Credit Card Rewards Programs
      • Debit Card Ownership
    • Contactless Payments
    • Gen Z and Buy-Now, Pay-Later (BNPL) Loans
      • BNPL Market Size
      • Overall BNPL Usage and Key Cohorts
      • Post-Boomer Generations Dominate as BNPL Users
      • Gen Z Are Most Likely to Be Increasing Their Use of BNPL
      • Platforms for Use of BNPL Services
      • Characteristics of BNPL Loan Usage
      • Enter BNPL-Style Loans Through Bank Credit Cards
    • Digital Wallets
      • Bank on Your Phone
      • Gen Z is Increasing its Use of Digital Wallets
    • P2P Payments
      • Gen Z and P2P
      • Payment-to-Merchant (P2M)
    • Cryptocurrencies
      • Emergence Tied to Global Recession
      • Crypto Opportunities for Card Networks and Issuers
      • Visa
      • Mastercard
  • The Gen Z Cohort
    • Overview
      • The Economic Opportunity
        • Table Gen Z Disposable Income That Could be Put on Cards, 2021, 2026, 2031 ($billions in constant 2021 dollars)
      • Placing Gen Z Within the Generational Grid
        • Table Years of Birth and Ages of Generational Cohorts, 2022
    • Composition of Gen Z
      • Ethnicity and Racial Composition of Gen Z
        • Table Racial/Ethnic Composition Recent Generations. Snapshot of 7 to 22-year-olds in Each
      • Education
      • Employment
        • Table Labor force status of persons 16 to 24 years old by school enrollment / educational attainment, October 2021 (# in thousands)
        • Table How Has the Pandemic Impacted Your Personal Finances?
      • Economy Now Worries Gen Z More than its Core Concern: Climate Change
      • Pros and Cons of Working Remotely
      • Digital Drives Everything
      • Gen Z Using Digital to Create New Ways of Managing Finances
        • Table Gen Z Is Most Likely to Believe Money is the Best Measure of Success, All Generations, 2022 (Percentage)
        • Table What Gen Z Wants to Learn vs. What Their Elders Want Gen Z to Want to Learn
        • Table Investment Vehicles for Gen Z, 2022
      • Which Gen Z Preferences Reflect Youth? Which Reflect Their Uniqueness?
        • Table Preferred Payment Methods by Generation, 2021
        • Table Gen Z Is Least Likely to Save to Pay in Full for a Purchase vs. Borrowing, All Generations, 2022 (Percentage)
  • Gen Z and Finances
    • Generational Context
      • Key Concerns
      • Pandemic Was Massively Disruptive to Gen Z
        • Table How Has the Economic Downturn Impacted Your Personal Finances?
      • Gen Z Workers Pushed for Higher Wages and Better Relations With Management
      • Economic Events Have Long Coat-Tails
      • Federal Student Loan Repayment Freeze Helped Gen Z
        • Table Sources of Educational Debt Among Borrowers, 2022
      • Real Estate and Gen Z: Big Dreams Meet Little Money
        • Table Gen Z's Top Anticipated Obstacles for Buying a Home
        • Table Adults Say Gen Z Has a Harder Time Paying for College and Buying a Home Than Their Parents' Generation
      • Gen Z Is Tapping New Sources to Get Their Credit Scores Up
        • Table When Gen Z Plans to Buy Their Homes
      • Gen Z Income
      • How Gen Z Is Spending Its Money
        • Table Spending Categories for Gen Z Other Than Rent, 2022
        • Table Bill Payment Methods Used in Past 12 Months, by Generation, 2022
        • Table Gen Z Is Most Likely to Acquire Today Rather Than Wait, All Generations, 2022 (Percentage)
        • Table Where Gen Z Allocates Its Savings and Investments, 2021
      • REITs Through Crowdsourcing
  • Gen Z and Financial Services
    • Gen Z Is Pursued by Marketers
      • The Gen Z Population Count
        • Table Gen Z Population between ages of 18 and 25 by year of birth (# in thousands)
      • Gen Z and Digital Banking
      • Gen Z Pays High Monthly Service Fees to Bank
      • Friends and Family Recommendations Drive Bank Selection
        • Table Very Important Criteria for Choosing a Bank, by Generation, 2022
      • Checking Accounts
    • Investing
      • 20 Million New Investors
      • Robinhood
    • Cryptocurrencies
      • Roots in Global Recession of 2009-2009
      • Crypto Opportunities for Card Networks and Issuers
      • Targeting Gen Z and Millennials Cardholders, Card Networks Offer Crypto Rewards to Cardholders
      • Models for Crypto-Cards: Credit Cards and Prepaid Debit Cards
      • Crypto Rewards Credit Cards vs. Crypto Rewards Debit and Prepaid Debit Cards
      • Cryptocurrency Credit Cards
  • Gen Z and Payments
    • Introduction
      • Why the Market Is in Hot Pursuit of Gen Z
      • A Word About the Payment System
      • Real Time Payments Routing is Expensive for Gen Z
      • Credit Card Networks
    • Gen Z and Payment Cards
      • Growth of Credit Card Industry
        • Table U.S. Credit Card Purchase Volume for Mastercard, Visa and American Express, Quarterly, 2021 - 2022, (in $billions)
      • Gen Z Have Relatively Lower Credit Card Usage
      • Gen Z Spends Less than Other Groups When They Use Credit Cards
        • Table Monthly Credit Card Expenditures, by Generational Cohort, 2022
      • Gen Zers Are Less Likely to Prefer Credit Cards for Payments
        • Table Gen Z Is Not Embracing Credit Cards, 2021
      • Gen Zers Are Somewhat Less Confident About Credit Card Providers
        • Table Agreement with Selected Statements About Preferred Credit Card: By Generational Cohort, 2022 (percent)
      • Gen Zers Lag Millennials in Awareness/Assessment of Credit Card Benefits
        • Table Agreement with Selected Statements About Credit Card Benefits: By Generational Cohort, 2022 (percent)
      • Gen Z Shows its Pragmatism in its Credit Card Rewards Program Selections
        • Table Credit Card Rewards Programs Chosen by Rewards Credit Cardholders, by Generation, 2022
      • Gen Z Is Nonetheless the Fastest Growing Source of Credit Card Originations
        • Table Gen Z Is Fastest Growing Source for Credit Card Originations 2018-2021
      • Debit Card Ownership
        • Table Debit Card Ownership by Network Brand, Across Demographics, 2022
      • Debit Card Use Increasing Since the Pandemic
        • Table U.S. Debit Card Purchase Volume for Mastercard, Visa - Quarterly 2021 - 2022, (in $billions)
    • Gen Z and Buy-Now, Pay-Later (BNPL) Loans
      • BNPL Was Made for a Global Pandemic
        • Table U.S. Buy-Now, Pay-Later (BNPL) Market: Estimated CAGR for 2015-2020 vs. 2021-2025 (percent)
        • Table U.S. Buy-Now, Pay-Later (BNPL) Market, 2021-2025 (in $billions and percent growth)
      • Retail Payments Have Become the New Alternative to Marketing Campaigns
      • BNPL Financing Upstreamed and Downstreamed to Larger/Smaller Purchases
      • Consumers Demanded BNPLs for Debit Card Sized Transactions
      • PayPal Credit Responded to Consumers by Offering 0% Interest on $30+ Purchases
      • Fintech Innovation Capitalized on Greater Consumer Demand for Personalization
      • Card Products Enhanced Security and Loyalty Programs
      • Overall BNPL Usage and Key Cohorts
      • Post-Boomer Generations Dominate as BNPL Users
      • PayPal Credit Remains Most Used BNPL Loan Provider
      • Apple Pay Later
      • Recentness of BNPL Loan Usage
      • Gen Z Are Most Likely to Be Increasing Their Use of BNPL
      • BNPL Loans by Amount Borrowed
      • Platforms for Use of BNPL Services
      • Characteristics of BNPL Loan Usage
        • Table On Time BNPL Loan Repayments, August-September 2021 (percent of BNPL customers)
        • Table Customer Service Patterns for Buy-Now, Pay-Later (BNPL) Services, August-September 2021 (percent of BNPL customers)
      • Enter BNPL-Style Loans Through Bank Credit Cards
    • Digital Wallets
      • Standard Bank-on-Your Phone Features
        • Table Gen Z and Millennials are Heaviest Users of Digital Payment Services, 2022
      • Gen Z Is Increasing its Use of Digital Wallets
      • Apple Dominates the Phone-Based Digital Wallet Space
      • Amazon Pay
      • Google Pay
      • PayPal
    • Gen Z and P2P
      • Table Top P2P Payment Apps, 2021 (% of online adults who recently sent money to another person using a payment app)
      • IRS Interest in P2P Payments
      • Payment-to-Merchant (P2M)
      • Contactless

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