Banks Must Adapt to Meet the Payments Needs of Gen Z

Much has been written about the unique traits and characteristics of the so-called Generation Z. They are the first true digital natives, a generation that has grown up in a world where instant gratification is the norm. All they have known is near immediate access to everything from goods, services, and experiences.

This matters to banks, because these expectations shape what younger customers demand when making payments – a seamless, frictionless experience without delays. To win over this new generation, banks must provide tailored solutions that meet their very specific needs.

Embrace Mobile-First Payments

It is well known that Gen Z is as a very tech-savvy age group, and they are more willing to try out alternative payment methods than older generations. Currently, they hold a clear preference for mobile-first payments, leaning towards digital wallets, which offer quick and effortless transactions, aligning perfectly with a desire for convenience.

However, this openness to new payment methods also means they are more likely to abandon a payment provider if the method does not work for them any longer. Unlike previous generations that may have held strong brand loyalty, younger customers will easily lose faith in a provider if a payment experience fails to meet their expectations. Hidden fees, poor communication, and surcharges for international spending are just some of the ways in which banks fail to deliver the customer experience that causes account holders to consider a switch. As such, banks must work even harder to improve their customer experience, by making customer journey simpler, more transparent, and more tailored to individual spending needs.

While Gen Z is more willing to try different payment methods, it is also true that they have learned to be cautious. Having grown up amidst the financial crisis, they are very familiar with an uncertain macroeconomic picture and the lingering threat of a recession.

Many have seen their parents struggle under the burden of debt repayments after the housing market collapsed and consequently, are more averse to using credit. They are also reluctant to use credit cards for everyday purchases – on average, those Gen Z that use them have two credit cards while Baby Boomers have more than four. When they take out credit, it is only for real needs like housing, and to the prioritise paying off outstanding debts as soon as they have some savings. Banks must therefore be prepared that these customers will conduct a lot more research on a financial product before committing. 

Prioritise Cost, Speed and Transparency

For payments, cost-effectiveness, efficiency and transparency are non-negotiables for the new class of bank customer. Given the plethora of information at their fingertips, they are likely to use comparison websites to identify the best payment providers before committing to a service. This applies to all services but extends to banking too, where Gen Z customers do not exhibit the same level of brand loyalty as their predecessors. They are readily willing to go with whichever option provides the best service, for the best price.

They expect to be offered competitive rates and assurances that payment processes are fast and efficient. On top of that, they require clear information around fees, the security of their funds, and prefer real-time updates. Banks will need to provide these details upfront and must have the ability to let customers know where their money is at any given moment in time.

As customers, Gen Z’s influence is growing rapidly. Currently representing one-third of the global population, meeting their demands for instant, frictionless and convenient payments is crucial for banks looking to maintain their competitive standing. However, as an industry, we must be cognisant that what has worked for customers in the past may not hold true in the future.