NMI’s executive team discusses the growing influence of Generation Z and other predictions for 2024 in Payments 2024: NMI Executive Predictions and Insights for the Year Ahead.
Generation Z—people born roughly between 1997 and 2012—is redefining how consumers interact with brands and what they expect from the shopping and payments experience. Already big spenders, the influence of Gen Z will only grow in the coming years, pushing businesses to adopt new behaviors and technologies.
With younger consumers more likely than their older peers to switch brand loyalty in favor of a better buying experience, merchants will have to adapt to stay afloat. Many businesses are already redesigning their shopping and payment experiences to meet the unique needs and habits of Gen Z. As a result, Gen Z will continue to be a key driver of innovation and change in the payments space in 2024.
The First Digital Native Generation Is Coming of Age
Gen Z is the largest generation on Earth. In the U.S., they are second only to millennials. Half of Gen Z are adults who have entered (or will soon enter) the workforce. Gen Z is the first generation to grow up with widespread internet usage. They are digital natives, meaning the internet has influenced their relationships with the media, commerce and brands from an early age.
As consumers, their collective spending power is growing rapidly. Gen Z already outspends millennials, and the gap may widen over time. In the U.S., Gen Z’s average earnings are growing at almost double the overall national rate, and their after-tax income may hit $2 trillion by 2030.
Gen Z Does Commerce Differently
For businesses, selling to Gen Z requires understanding how they differ from other generations. Merchants must understand their digital habits, which are dominated by online media like video and short-form content channels.
“Today, 98% of Gen Zers, also known as the single-device generation, currently own a smartphone, with 91% having received their first mobile device before the age of 16,” NMI CEO Vijay Sondhi says. “Smartphones are not just devices; they are integral to their identity and, by extension, to their shopping and payment experiences.”
Rethinking the Payments Journey in 2024
Gen Z notoriously has low brand loyalty, as a recent McKinsey report shows. Of those surveyed, 30% go to their preferred brand for new products and services, while more than 62% look for alternate options, even when they have a favorite brand. Unfortunately, this means even after establishing a core customer base, merchants who fail to meet Gen Z expectations risk losing customers to more innovative competitors.
One aspect driving Gen Z payment preferences is the desire for fast, seamless, “invisible” payments. This is similar to the Uber experience; users hail a ride, reach their destination and go about their business. At the end of the ride, the app processes the payment automatically, so users don’t have to search for a card or remember to bring cash. These payment experiences are so fluid, they’re practically invisible.
“As the payments industry starts to integrate more digital-centric payment methods like mobile wallets, text-to-pay, QR codes and tokenization, it’s evident that the single device generation will favor merchants who prioritize invisible payments. Merchants will need to adapt to invisible payments or risk becoming irrelevant to the most influential consumer groups of our time,” Sondhi says.
As consumer preferences evolve, 2024 will see more payment providers and merchants refining Gen Z’s route from their preferred media channels to order confirmation. Perfecting those Gen-Z-focused omnichannel commerce strategies will be crucial for success throughout the second half of the 2020s and beyond.
For more 2024 predictions from the NMI executive team, download Payments 2024: NMI Executive Predictions and Insights for the Year Ahead.
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