Generation Z, people born from the mid-1990s to early 2000s, is emerging as the next consumer force. The oldest of the 68 million Americans who are part of Gen Z are now completing their education, entering the workforce, and building wealth. Gen Z’s estimated spending power in the U.S. is as much as $143 billion, with indirect spending power of $600 billion. Just as when millennials became a predominant consumer force and ignited changes throughout the industry, ISVs and VARs will see changes triggered by the rise of Gen Z.
Behaviors Shaping Gen Z Consumer Trends
Researchers and analysts studying Gen Z have found some common traits that members of this generation share. Perhaps this group’s most unique characteristic is that they are true digital natives. They don’t remember a time before the internet, mobile phones, and social media. They’ve been connected digitally for their entire lives.
Additionally, McKinsey & Company has identified four core behaviors of Generation Z. Members of this cohort:
Value individual expression and avoid labels
Mobilize for causes
Believe in dialog to improve the world and solve conflicts
Are highly analytical and pragmatic
Also, they grew up during the Great Recession of 2008, which makes them averse to debt and more conservative than millennials. Their purchasing decisions are also influenced by the value they place on uniqueness and individuality and ethics.
These shared experiences and characteristics make Gen Z consumers notably different than consumers before them. Their habits as consumers are in contrast to millennials’ value on experiences over things, Gen X’s focus on brands, status, and luxury, and baby boomer’s inclination to focus on their families’ needs when making purchases.
What Generation Z Expects from Payments
When it comes to payment transactions, Gen Z wants speed. The majority are accustomed to the ease of sending or receiving person-to-person payments. Merchants need to create payment experiences, whether in-store or online, that are just as convenient.
From using technology their entire lives, Gen Z knows the difference between tech that provides good user experiences and solutions that are subpar. They expect payments to be easy, transactions on any channel to be seamless, and instant access to information. Gen Z consumers will also expect a merchant’s loyalty rewards program to be automatically tied to their apps or accounts, and they’ll want to be able to make purchases directly from social media sites.
Gen Z consumers appreciate technology that makes managing their accounts easier. Approximately 33 percent of Gen Z consumers have used a mobile wallet compared to 22 percent of millennials. Also, many aren’t educated on how to manage their finances, so they may also find value in payments tools with analytics. Insights from data can show them how they’re spending their money and how they can make the best use of their resources.
Because Gen Z consumer trends include avoiding debt, merchants may want to consider offering layaway or payment plans for large purchases, with Gen Z-friendly options such as automatic recurring payments.
The Price Businesses Will Pay If They Get It Wrong
An American Express survey conducted by Forrester Consulting asked Gen Z consumers what would make them stop using a product or service. The poll revealed that Gen Z consumers are more likely than millennials to shift their loyalty to another business if they encounter:
Poorly designed mobile features
Slow response to customer service issues
Poor responsiveness on social media
The survey also found that 46 percent of Gen Z consumers say data security and privacy are essential to keep their business, and they’re intolerant of security breaches and negative news about the companies they’ve done business with.
ISVs and VARs should begin discussing the impact Gen Z consumers will have (or currently are having) on your clients’ businesses and be ready to implement solutions that meet their new demands. Your clients who want to remain relevant will be looking for solutions that will help them attract and retain Gen Z clients — and any ISV or VAR positioning themselves for continued success will provide them.