3 Important Generation Z Consumer Insights for Payments
What’s So Special About the Youngest Generation?
Generation Z, defined as people born from 1997 onward (note that this starting date varies by different reports and research experts), is currently the youngest generation. These digital natives were the first to grow up with immediate access to the Internet and other digital resources. Because of this, Generation Z consumer insights reveal that their spending power has increased rapidly and significantly.
As of 2019, Generation Z commanded $44 billion in buying power, but this year, they’re expected to account for nearly 40% of all consumer spending. To say that’s significant would be an understatement. However, Generation Z is in a unique spot. Even the oldest of them would have just recently graduated from a four-year university and would be entering the workforce. However, what resources they do have are being spent on new platforms and in new ways than many brands are used to seeing.
For example, a report from Colloquy indicated that 84% of Baby Boomers (those born between 1946 and 1964) prefer shopping in physical stores. Generation X (those born after Boomers up to the early 1980s) prefer to do research online and then shop in store. Generation Y (aka Millennials), who became the first generation with widespread access to the Internet and mobile devices, use community-generated content, reviews, and social media to make their purchasing decisions — 73% of which are done online and on a mobile device.
But for Generation Z, consumer insights show that as many as 47% research items on mobile devices while shopping in a retail store. That, and they prefer participation and engagement with brands and will spend more on purchases when they believe this is what they’re receiving. Because of this, organizations should prioritize personalized, interactive shopping and implement payment solutions that further streamline Generation Z’s experiences.
Let’s take a look at a few more Generation Z consumer insights as well as considerations that can help companies harness their ever-increasing buying power.
1. Focus on Mobile First
With Generation Z’s easy and immediate access to mobile devices, it’s clear that online shopping and mobile payments are their preferred method for making purchases and sending money. In fact, Generation Z consumer insights reveal that this group is already using phone-to-phone (P2P) payments more than any other generation — for both shopping and personal transactions. Nearly 80% of Generation Z survey respondents reported using these services at least once per month, with nearly 50% of those using them one to five times per month and more than 30% using them six or more times per month.
This information coupled with the fact that Generation Z is ditching traditional payment methods — e.g., credit and debit cards — for digital wallets like Apple Pay, Google Pay, PayPal, etc. makes the case even more compelling for retailers and other organizations that accept consumer payments to consider how they’re set up to do so. While the Millennial generation still commands the greatest buying power, Generation Z is not far behind. Efforts must be made now to ensure payment solutions are in place.
2. Optimize the Shopping Experience
While it may seem like newer generations are edging toward online shopping only, this is far from the case. For the 2019 holiday season, online sales accounted for only 19.2% of total retail sales. While Generation Z is only a piece of this pie, all generations are still actively shopping at physical stores. And according to Generation Z consumer insights, nearly 50% of shoppers in this demographic are combining online/mobile with their in-store experience. They do this for a few reasons: 1) checking for items online that aren’t available in the store, 2) comparing retail pricing with competitors, and 3) searching for coupons and discounts online.
With the combined use of online/mobile and in-store, it’ll be important for retailers to focus on creating a truly omnichannel experience not only for Generation Z but also for older generations who still shop in stores. More than 75% of Generation Z survey respondents said they would be more likely to do business with a brand if it allowed flexible payment options. Allowing shoppers to scan items to buy from other locations, order items and have them shipped same-day, buy online for locker-based pickup, and more will ensure that Generation Z feels the connection with the retailer that drives their purchase decision-making. This helps to deepen the relationship and create loyalty.
3. Make Security a Priority
Generation Z is an incredibly thrifty generation. They value their money as a result of the Millennial generation getting burdened down by the combined barriers of heavy student loan debt and the rising difficulty in obtaining affordable housing (which includes renting and buying). As a result, they open savings accounts earlier, spend more wisely, and ultimately pay close attention to how their money is managed.
But when it comes to digital payments, Generation Z actually cares about something else more than saving money. They care about security. According to a survey by BillTrust, Generation Z ranked security above fees, speed, and user experience on a scale of what matters most to them in digital payments. While security is a requirement for payment processing of all kinds, organizations should make efforts to take their security to the next level.
A proactive approach to protecting users’ data ensures that companies are ahead of new threats and are demonstrating a commitment to their customers. Generation Z will appreciate it, too — more than 30% said they would not do business with a company if their data was compromised, and 60% said it would ultimately come down to how the company responds.
Where Does Your Payment Strategy Stand?
Generation Z is continuing to grow up and harness more consumer buying power. Has your organization acted on the preferences of this generation when it comes to your payment options? If not, now is the time — with tens of billions in spending power, they’re ready to work with you. What matters now is whether you’re ready to work with them.
TRG is ready to help you develop a payment strategy that meets the needs of this generation. Fill out the form below to get in touch with our payments team.