Generation Z on Commerce: Why Alternative Payments like Kartera are becoming their Preferred Choice

Generation Z, the demographic cohort born between 1997 and 2012, is rapidly maturing and transforming the landscape of commerce. With an estimated $360 billion in disposable income, according to Bloomberg, this group's economic influence is undeniable. This represents more than double their financial clout just three years ago, signaling a significant shift in consumer power dynamics.

Businesses are keenly aware of Gen Z's distinct purchasing behavior, which diverges sharply from that of previous generations. One area ripe for adaptation to align with Gen Z preferences is payment methods. This article explores the unique traits of Gen Z, their preferred payment methods, and how businesses can attract this tech-savvy generation.

Understanding Generation Z

Generation Z, making up about 20% of the U.S. population as of 2023, is the first cohort to grow up entirely in a digital environment. This digital nativity shapes their openness to technological integration in all aspects of life. Beyond their tech-savviness, Gen Z is deeply committed to social and political causes, seeking authenticity in brand interactions.

Despite their comfort with online platforms, Gen Z shops almost equally online and offline, demanding seamless, frictionless payment experiences regardless of the shopping medium. According to Ecommpay, 65% of Gen Z respondents are "very likely" or "somewhat likely" to abandon an online purchase if their preferred payment method isn't available. This underscores the critical need for businesses to offer diverse and convenient payment options.

How Does Gen Z Prefer to Pay?

Gen Z's lifelong exposure to digital advancements has set high expectations for convenience in every transaction. Their payment preferences reflect a marked departure from those of Millennials, Gen X, and Baby Boomers. The EY Gen Z Payments Survey highlights that Gen Z is up to three times more likely to use alternative payment methods such as contactless payments, payment apps, Buy Now Pay Later (BNPL), and in-game currencies compared to other generations.

To appeal to Gen Z, businesses must embrace multiple payment options and stay abreast of FinTech innovations. Notably, 79% of Gen Z have tried a new payment method in the past year, the highest percentage across age demographics.

Preferred Payment Methods of Gen Z

Digital Payments

Leading the charge in digital payment adoption, Gen Z values methods that align with their demand for speed, security, and user experience (UX). According to a Billtrust survey, nearly half of Gen Z respondents prioritize security in payment platforms, with fees being the second most important feature. Digital payments, which include multi-factor authentication (MFA) and bank-level encryption, meet these needs by offering robust fraud prevention and risk reduction without consumer-facing fees.

Pay by Bank, a digital payment method, is particularly appealing to Gen Z. It allows users to link their bank account for instant fund transfers without the need for apps, fees, or credit/debit cards. This method is not only the fastest and most accessible but also positively influences Gen Z's perception of businesses, with 74% saying that acceptance of new digital payment forms enhances their view of a company.

Buy Now, Pay Later (BNPL)

Known for their prudent spending habits, Gen Z saves about a third of their income. BNPL options cater to this thrifty mindset by allowing purchases without immediate full payment, effectively acting as a budgeting tool. According to Charlie Youakim, CEO of Sezzle, BNPL's versatility in usage scenarios makes it a lasting trend. This method helps manage cash flow, making it a preferred choice for a generation keen on financial security.

Contactless Debit Payments (Tap to Pay)

While Gen Z favors debit over credit to avoid fees and maintain budget health, they seek the simplicity of contactless options. Billtrust's survey indicates that 39% of Gen Z respondents find entering a PIN a pain point when using debit cards. Tap to pay options offer a convenient, contactless, and faster solution, aligning perfectly with Gen Z's preference for minimal steps in transactions.

Kartera: Meeting Gen Z RIsing Payment Preferences

As businesses strive to meet Generation Z's evolving demands, adopting an alternative payment solution like Kartera is a strategic move. This payment method not only aligns with Gen Z’s preference for speed, security, and convenience but also enhances customer perception and loyalty. According to recent surveys, 74% of Gen Z respondents state that accepting new digital payment forms positively impacts their view of a company. By offering Kartera, businesses can significantly reduce processing fees, boost average order values, and ensure seamless transactions, which are critical factors for capturing and retaining Gen Z customers.

For merchants, a solution like Kartera provides substantial benefits. It reduces processing fees by up to 90%, a significant saving compared to traditional methods. Additionally, Kartera enables real-time payments, eliminating the delays associated with settlement periods. This immediacy is crucial for Gen Z, who prioritize speed in their transactions. Kartera also combats friendly fraud, a common issue in e-commerce accounting for over $25B in annual losses for merchants, and enhances security with bank-level encryption and multi-factor authentication (MFA).

Moreover, Kartera has a proven impact on key business metrics. It increases Average Order Values (AOV) by up to 48%, reflecting Gen Z's tendency to spend more when their preferred payment methods are available. The platform also improves Repeat Purchase Ratios (RPR) by up to 86%, demonstrating its effectiveness in fostering customer loyalty and repeat business.

In conclusion, Generation Z’s distinct preferences and considerable spending power necessitate a shift in how businesses approach payments. By adopting innovative solutions like Kartera’s Pay by Bank, businesses can meet Gen Z’s expectations, reduce costs, and drive significant growth. This approach not only meets the immediate needs of today’s digital-native consumers but also positions businesses for long-term success in a rapidly evolving marketplace.

To discover how Lynk can help your business grow and keep you ahead of the curve, get in touch with us today by clicking here.