Gen Z: a generation of new payment patterns

Generation Z, also known as Gen Zs or zoomers, represent the single largest age cohort, as they are now more than 2.5 billion, or about one-third of the whole global population. These people born between the late 1990s and the early 2010s are the first truly digital natives – a generation of people who have grown with the internet and social media since the start of their lives.

As a matter of fact, Zoomers are now starting to enter the workforce, becoming increasingly relevant for brands and service providers. A research by Bank of America predicts that Gen Z income will grow four times over the coming years, reaching $33 trillion by 2030 and surpassing millennials’ income by 2031.

Gen Zs spend much of their time on social media, something that hugely influences their preferences, what they like and what they consume. Data shows that they are so at ease with digital things that they are the first generation saying to feel more like themselves online than offline.

How Generation Z decides where to spend their money

At Thunes we decided to take an in-depth look into Generation Z, with a global study on zoomers from 13 developed and emerging markets – looking for insights into their social, shopping, and payment preferences.

And here are some of the key things that we learned:

1.   Social media determine how Zoomers spend their money

More than 9 in 10 Gen Zs now use social media multiple times per day – with TikTok quickly becoming one the most used platforms along with YouTube, Instagram and Facebook.

Why is it so important? Because social medias clearly impact various aspects of their lives. And it’s an influence that is also real when it comes to spending decisions, especially for people living in emerging economies where an average of 66.4% say they bought products that they first discovered on social media (in Mexico, Brazil and Vietnam that percentage is even higher: 80%+).

The “TikTok made me buy it” theme and the #AmazonFinds lists have been very popular over the past few years, driving substantial purchasing activity and producing shortages of the products promoted. Then if social media are key for spending inspiration, rating and review websites play an equally important role when it comes to deciding how they spend money.

This is a frequent shoppers’ generation, that love to shop as much as love to party. Something that, once again, is particularly true in emerging markets, where zoomers spend about 19% of their budget shopping for clothes and electronic goods – a large proportion of what they spend going out to eat or with other forms of entertainment.

Source: “Gen Z: The Future of Spending – Uncovering How Zoomers Pay” report – by Thunes

2. Alternatives to traditional banks are gaining ground

The common pattern that we can observe among zoomers is their lack of enthusiasm for incumbents and traditional financial products. The majority of them say that they don’t even have a bank account (be it a personal bank account or one opened by their parents), in a global trend to move away from banking products.

So, what do they use for money management and everyday expenses? 

New tools and technologies are blossoming with the result of broadening up access to essential financial services. If previous generations, for a good part of their lives, haven’t had other choices but to pick a bank, now things are almost radically different.

Mobile wallets, which are usually provided by fintech newcomers or non-financial services players, are growing fast and are, in many countries, the most popular money management tool for zoomers.

One of the most extreme cases is the Philippines, where just 24% of those we surveyed said to have a bank account, while the ownership of mobile wallets is almost twice as high at 41%.

Also worth considering that mobile wallets remain a popular alternative even in other emerging economies, like Nigeria and Kenya, where banks have greater market penetration.

But what are the mobile wallets and payment brands used most often? 

There’s no single answer, as the preferences change significantly from country to country:

• In the United States, Paypal (17.8%), Cash App (14.4%), and Venmo (11.6%) are the 3 payment brands that are most commonly used by the Gen Z population. 
• In the United Kingdom, Apple Pay is the most popular, used by almost 1 of 3 young people living in the UK (29%), while Paypal remains the second most used payment solution with 1 in 5 respondents using it.

But the penetration and acceptance of global wallets such as Apple Pay and PayPal is not ubiquitous: they are often not prevalent in the emergent markets, due to lack of infrastructure or penetration of smartphones.

In In these countries local brands dominate the market: 

• In Kenya 91% of Zoomers use M-Pesa, 
• In the Philippines, GCash – a wallet owned by a local telecom operator – is the most popular option, representing 76.4% of the total usage,
• In Bangladesh, 73.6% of people use home-grown mobile wallet called bKash, 
• In India, PayTM almost has half of the market with 44.4% zoomers choosing it as a primary payment brand, followed by Google Pay (29%) and PhonePe (14.2%).

3. Cash is not dead. At least not yet.

Zoomers are increasingly unlikely to use physical cash to pay bills and their everyday expenses, but still there’s a portion of people that still use it – especially in certain emerging economies, like Pakistan, Nigeria, Bangladesh, Kenya and Philippines, where cash remains an important payment method.

Nonetheless, it’s key to understand for new payment providers and those interested in selling products and services to this generation that there’s a need to think beyond cash, offering more payment options that better fit their needs. And while physical cash is still not dead, the trend to move away from its use is clearly observable in most Western markets.

All in all, there are a number of factors that play an important role for Zoomers when it comes to picking a payment method. Overall, brand trust and security are the most important factors, followed by ease of use and the availability of useful features and services.

Want to know more about Zoomers’s payment habits in each country? Understanding what they value is and how they take decisions will be crucial for every company to stay competitive in the market.

In the recent report we have published – Gen Z: The Future of Spending – we uncover how zoomers pay and many other interesting insights about their preferences and spending habits.

Download it from this link: https://www.thunes.com/insights-reports-gen-z-future-of-spending/.