Members of Gen Z think differently about technology and the shopping experience – and how they prefer to pay. The merchants that understand what Gen Z members want as a growing demographic can deliver the customer experience and convenience that drives revenue growth.
Amazon Payment Services sponsored a study by SixthFactor Consulting to investigate the payment preferences of Gen Z members. The research discovered that Gen Z’s payment preferences hinge on convenience, security, and compatibility with their bustling lifestyles.
Therefore, businesses that want to secure buy-in from Gen Z members need to provide an array of matching payment methods. In this article, we discuss how Gen Z thinks about payments and what merchants need to do to ensure Gen Z enjoys the payment convenience that they expect.
What is the motivation behind Gen Z's payment choices?
As “digital natives” Gen Z members grew up surrounded by technology and the internet – compared to Gen X and Millennials, who could be described as “digital immigrants”. This means that Gen Z members exhibits markedly different views and preferences when it comes to shopping – and paying.
What spurs Gen Z's payment choices? Given that Gen Z members are a digital-first generation it’s unsurprising that Gen Z members prefer cards to cash – and that, where cash is used, it’s largely due to the non-acceptance of digital payments by some merchants.
The ease of use of payment cards, along with their transparent transactions, are the driving forces behind their popularity. For example, in the UAE based on the survey, the top three reasons for using cards were given as "easy to pay exact amount" from 36% of respondents, "take less space in my pocket" at 34%, and "full visibility of every transaction" at 33%.
Based on the survey one respondent said that: “I use my card because it’s easy and fast to make payments. When I pay by cash, I need to count to ensure I’ve paid the right amount (but) with card payments it’s so easy and payment is done with just a tap.”
In this research, there are regional nuances. For example, the study revealed that in the UAE card payments were relatively speaking more popular than other payments, while cash enjoyed at least somewhat of a foothold in Saudi Arabia.
Notably, we noticed that affluence impacts payment methods, with affluent respondents in Saudi Arabia favoring payment cards and those in Egypt favoring a particularly diverse set of payment methods, including e-wallets.
Cutting edge payment methods
Digital wallets are a relatively new entrant in the Middle East and North Africa (MENA) region and are growing due to their convenience and accessibility. However, the respondents from research suggested that the usage of digital wallets is hampered by a lack of acceptance and occasional transaction glitches.
The SixthFactor Consulting survey also delved into three other, innovative payment options Gen Z members are increasingly adopting: peer-to-peer transfer (P2P), Buy Now Pay Later (BNPL), and installments. The results showed that P2P transfers are valued for their practicality – just like payment cards, eclipsing cash simply because using P2P transfer is more convenient.
“When I’m out with my friends and when we spilt bills with P2P, I can transfer funds to their account immediately, I don't have to visit an ATM to withdraw money’’, as one respondent said, which underscores the convenience that drives Gen Z’s adoption of many payment technologies.
Likewise, BNPL offers convenience and simplicity for large purchases which is why roughly half of the respondents from the survey suggested that they would use BNPL sometime in the future. On a country-by-country breakdown, 52% of respondents in KSA said they would consider using BNPL, with 54% in the UAE and in 44% in Egypt saying so. Respondents liked using BNPL because there was little paperwork to deal with – and since there’s no interest to pay.
Installments also allow for spreading out the cost of significant purchases, often over a longer period than BNPL, but the adoption of installments is hindered by high interest rates and complex paperwork.
Key to Gen Z engagement
Convenience during the checkout experience is a non-negotiable for Gen Z members: every hiccup encountered at checkout risks a hit on revenue. A fluid payment experience is therefore critical – which includes offering checkout with digital wallets, but also embracing omnichannel payments so that customers can pay through their method of choice on any device.
As part of a drive towards convenience, the survey found that in-app payments are gaining traction, but respondents suggested that in-app payments are in competition with other common payment methods. Super apps, currently available only in the UAE, are highly regarded for convenience, allowing cross-category purchases within a single app.
Convenience matters, but trust is a key factor. We noted that Gen Z members are deeply concerned about losing money during transactions. Hence, they place a significant value on trust and consumer protection. They are more likely to support businesses they trust and rely on reviews and opinions of others to gauge how trustworthy a business is.
Payment as a gateway to Gen Z
The insights gained through the research into Gen Z's payment preferences provide a few valuable lessons for merchants. To win over this generation, retailers must offer a variety of secure, user-friendly payment methods, build trust, and ensure a smooth checkout experience. Catering to these aspects opens the door to a different audience.
Merchants should keep in mind that Gen Z members are the customers of the future. In other words, it’s not just about adapting payment technologies to grow market share today. Instead, merchants should hook Gen Z today – using flexible payment methods adapted to this generation’s preferences – in order to ensure that Gen Z exhibits loyalty as their spending power grows.
Want to find out more about Gen Z and the evolution of payment preferences? Download the whitepaper Understanding Gen Z here.
