By: Jared Serovich, Intern, Marketing, PSCU
Gen Z (those born between 1995 and 2015) is growing up, graduating from high school and college, and becoming increasingly influential in the payments space. They are bringing their comfortability with technology and change with them. From growing up using computers and the internet, they are uniquely aware of both the challenges and benefits of adopting new technology. Gen Z is currently exploring and pushing the boundaries of modern payment methods, and what they find and like will shape the payments landscape of tomorrow. Credit unions will have to stay on top of – and ahead of – these trends if they are going to compete for the attention of Gen Z, which is actively being targeted by new digital banks and other financial institutions.
Embracing Change (We Need Options!)
The world today is changing and growing at a faster rate than ever before, and payments are no exception. Gen Z may be the most diverse generation in the way that they make payments. From talking to friends, I discovered that we have a variety of different preferences. A majority still prefer the simplicity and budgeting of debit cards; they don’t want to worry about spending more than they have. They also know the most about debit cards, how to use them and the security risks associated with them. Some prefer the rewards and credit-building capability of credit cards, and they pride themselves on staying on top of their finances, so it is not difficult for them to manage monthly payments. Others are exploring the capabilities that digital wallets have to offer, learning that they no longer have to carry a physical wallet or cards that could be lost or damaged. It is also very likely that the way we will make payments in just a decade or two is impossible to even conceptualize right now. Who could have imagined a store like Amazon Go just 10 years ago? It is important that we are not married to one form of payment, and that we stay open to adopting new methods that prove to be more convenient and secure.
COVID-19 is Shaking Things Up
Although innovations such as contactless cards and mobile wallets were developed before the coronavirus pandemic, their adoption has been expedited by the new necessity for less physical contact. Gen Z is more willing to try new modes of payment, but they do remain skeptical of the safety and security of new technology. It is important that credit unions are able to provide up-to-date information regarding how to use these forms of payment, as well as relevant fraud protection and safety. While some members of Gen Z may be very knowledgeable about payments and become early adopters, others may resist such change.
The Best of Both Worlds (Convenience and Security) – and Control
Gen Z is certainly more willing to explore the potential benefits of mobile wallets, including convenience and less contact. However, they are well aware of the associated risks. They grew up dodging phishing emails and spam callers and are very aware of potential fraud security risks associated with new technology that has not been thoroughly tested. Among my friends, those who have not explored contactless payments and mobile wallets cite distrust and lack of security as the primary reasons. This is an opportunity for credit unions to lead the way in being sources of information for their members, effectively building value and trust. Additionally, giving members control over their cards through a variety of alerts is a way to enhance security, making members more comfortable when adopting new technology.
The P2P Battleground
The use of person-to-person (P2P) payment platforms is growing and many have entered the arena. The longstanding champion, PayPal, is still preferred by older generations but is being challenged by newcomers including Venmo, Cash App, Zelle and others for the attention of Gen Z. Each has its own unique positioning and benefits. For many of my friends and me, the decision comes down to which platform is more popularly used by those who we interact with.
Innovation is a Two-Way Street
Future solutions will not just come from a top-down approach. Gen Z will rely on their financial institutions to educate them on the latest and greatest capabilities of different payment methods and accompanying services. However, after being armed with this information, Gen Z will provide feedback to their financial institutions directly through complaints or recommendations – or indirectly through their behavior. It will become vital that credit unions listen to this feedback and engage in this dialogue in order to remain competitive and provide the best possible solutions. To facilitate this, credit unions can be proactive by conducting research and interviewing members when developing new products and solutions.
The End of an Era for Cash?
The PSCU 2019 Eye on Payments survey revealed that cash was Gen Z’s second most preferred form of payment at 34%. However, this preference for cash is seriously being challenged. Many of my friends and I would routinely use cash for smaller payments and gas, but these payments are now being shifted to debit cards or mobile wallets for less contact, and because cards can be more easily sanitized. The idea of a cashless future is met with mixed opinions. While some of my friends embrace the idea of a cashless future, others are more resistant.
One of the biggest lessons I have learned this year is that change is both unforeseeable and constantly occurring. With this in mind, I am excited to see what our future holds for payments!
Jared Serovich is interning this summer with PSCU’s Marketing department to explore the possibilities of pursuing a career in marketing and identifying his passion. Jared will be starting his senior year at the University of Florida in the fall. He is pursuing his undergraduate degree in Business Administration, with a specialization in International Studies and a minor in International Development and Humanitarian Assistance.