Payments Redefined: Gen Z and the Future of Digital Payments

While most people are experiencing small wage increases and tighter budgets, one generation is entering its prime spending years: Gen Z.

Gen Z has seen higher wage growth and spending than other generations since the beginning of the pandemic. This financial freedom has many Gen Z consumers experimenting with new ways to pay. With their enthusiasm to try the latest and greatest tech, payments will head in new and exciting directions for years to come.

Read on to learn how Gen Z is changing payments as we know them.

Introducing Gen Z

Imagine being part of a generation that grew up with smartphones, the internet and all sorts of gadgets. That’s Gen Z! Born between 1997 and 2012, Gen Z makes up about 20% of the world’s population. While they’re still young – 42% are not yet adults1 – they’ve lived through interesting times.

Even with modern tech and the world at their fingertips, Gen Z hasn’t had an easy ride. They saw their parents and older siblings struggle during the
Great Recession. A global pandemic disrupted their lives during their most formidable years. Jobs are at a premium and money is tight. These events have greatly influenced the Gen Z relationship with cash and the economy. As more of them enter the workforce and make their own money, they have more say in what they buy – and how they buy it.

Gen Z is positioned to become an economic force

Gen Z’s purchasing power is growing. According to the Federal Reserve Bank, the income of individuals aged 16-24 has seen the most substantial growth compared to any other age group since the pandemic. This increase comes with more spending. Gen Z is the only generation to spend more year-over-year in that same period. Their overall spending power is still behind Millennial and Gen X households, but as they grow, their spending will grow too.

How is Gen Z spending their money?

We know that Gen Z is making more money and spending it, but exactly how do they spend it?

Like past generations, cards dominate Gen Z spending, especially online. A survey on payment method preferences among Gen Z adults shows that 57.2% use debit cards for online purchases. Debit-card use for in-person payments drops to 46% with cash next at 24.1% and credit cards coming in third with 23.4%1.

Reaching for a credit card to make a purchase feels like second nature to most of us, but Gen Z has an uneasy relationship with credit cards and debt in general. Having seen parents take on debt to get by during the Great Recession, many Gen Zers look to avoid debt at all costs.

According to a survey by Morning Consult, 30% of Gen Z reported having credit card debt. As more alternative credit options emerge, credit card issuers must work harder to win over Gen Z consumers.

Among the alternate credit options, buy now, pay later (BNPL) has become a favorite with Gen Z. With BNPL, Gen Z get the benefit of installment payments without the burden of high interest rates or fees. This allows consumers to make bigger purchases that are usually out of reach with traditional loans or credit cards. While 31.3% of U.S. consumers will be active BNPL users in 2023, Gen Z will make up 46.7%. By 2026, 59% of Gen Z will be BNPL users2. BNPL’s digital-first user experience pairs perfectly with the digital life styles of Gen Z consumers.

Another favorite payment option with Gen Z is prepaid cards or open-loop reloadable cards. Gen Z loves the convenience of prepaid – 40% call them ‘very convenient,’ versus 25.7% of all adults, per a Federal Reserve survey1. Given Gen Z’s limited earning power and credit histories, prepaid cards make sense. You don’t need a bank account like you do with debit cards, and creditworthiness isn’t a factor like it is with credit cards.

Gen Z and new payment tech

If there’s one thing that defines Gen Z, it’s their quick adoption of new tech, and that’s clear in how they pay.

According to Worldpay® surveys, Gen Z is at or near the top of adoption rates for new payment tech and ways to shop. In Worldpay’s Next-level Retail report, 55% of Gen Z used a digital wallet in the last 12 months3. As for future shopping and payment trends, Gen Z is optimistic and open to new things.
80% of surveyed Gen Z consumers are open to advanced checkout technology and 75% are open to using checkout-free stores.

“While Gen Z is seen as the torchbearers of new and innovative tech, they influence older generations too. The gap in the adoption rate of new payment tech between Gen Z and older generations is shrinking. This makes Gen Z a powerful force in payments, as businesses and financial institutions will have to speed up innovative payments to meet demand from all ages.” Worldpay

What influences Gen Z purchases?

Gen Z love to stay connected through their phones and social media and those channels play a significant role in Gen Z purchases and payments.

When it comes to social media, what friends and influencers say about products plays a big part in Gen Z purchasing decisions. They crave authenticity and find it in the voices of creators and influencers on platforms like TikTok. The often controversial and always viral social media giant is big with Gen Z. Think of all the viral trends and unexpected products hitting the market, and they most likely started on TikTok. If it’s a hit on TikTok, it’s safe to say it will be a hit with Gen Z. In fact, 43% of U.S. Gen Z adults start their product searches on TikTok4. Focusing on social media, especially TikTok, will be a big part of issuers’ strategies to gain Gen Z consumers.

For many consumers, smartphones are an extension of their experience of the world. Gen Z is no different. Gen Z has seamlessly integrated phones into every facet of their lives, including finances. It makes sense. As more of their lives are centered around their phones, why wouldn’t finances and payments be there, too?

Insider Intelligence predicts 20 million Gen Z consumers will adopt proximity mobile payments over the next four years, hitting 46.2 million by 2027. In 2021, 84.5% of Gen Z paid using their phone1. Adopting alternative payments like BNPL and cryptocurrencies will push mobile and digital payments further. This won’t stop debit-card use either as more Gen Z consumers put digital versions of their cards in their digital wallets.

Speaking of cryptocurrencies, Gen Z is a leader in crypto payments, with 15.9% of Gen Z making a payment in crypto in 2021 per the Federal Reserve1. That’s more than double the percentage of millennials and quadruple of Gen X. They aren’t scared by crypto’s volatility either and they’ll join Millennials as leaders of crypto asset adoption in 2025.

Gen Z is growing up. Can you keep up?

Gen Z’s distinctive traits, molded by a rapidly evolving digital landscape and economic uncertainties, have indelibly shaped their approach to payments and consumer behavior. As this generation continues to assert its influence, businesses and payment providers must adapt and innovate to meet their preferences, ultimately redefining the future of financial transactions.

By understanding and catering to Gen Z’s unique needs and aspirations, issuers can forge enduring relationships and embrace the transformative potential of the digital payment revolution.


1 Insider Intelligence “Gen Z Consumer Payment Habits” May 2023

2 Insider Intelligence “Gen Zers Drive BNPL Surge but Need a Push to Boost In-store Usage” 2023

3 Worldpay “Next-Level Retail: Through the Eyes of Global Consumers” 2023

4 Jungle Scout “Report: Gen Z Consumers Least Likely to Reduce Spending Amidst Inflation; 32% Shop Online At Least Daily” March 2023


Author: Worldpay


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