It seems that as 2022 progresses, the pandemic is getting smaller and smaller. But there are some trends that benefited from these circumstances. And, among all of them, we want to highlight the changes in payment methods.
That digitization was booming is something we have been seeing for a long time. Since 2020 it began to establish itself faster than expected. This made us innovate in payment methods. In the last two years, payments have become more digital. Now it is completely normal to see someone paying with a mobile phone, an e-watch or a digital bracelet.
This makes us wonder: What does Generation Z think of these changes? Will they have clung to the most traditional? Or will they bet on innovation?
Generation Z is naturally digital. According to the study Driving the Future of Payments: 10 Megatrends of Accenture, Generation Z consumers constitute the future customer base of the payment industry. They are the buyers of the future and will change the way you interact with merchants in the future.
They shop differently from their predecessor generations. In fact, they have played a very important role in the rise of e-commerce after the pandemic. In Number of Internet users who bought online in Spain in 2021, Statistical points out that, in 2021, approximately 3.39 million 16-24 year olds were heavy e-commerce users. He also states in Products purchased through the Internet by online consumers in Spain during 2021 that the average customer tends to opt mainly for the purchase of products from these five sectors: fashion (72%), leisure (71%), footwear and accessories (67%), Health & Beauty (60%) and mobile devices (59%).
We can point out several trends:
Decrease in the use of cash
Cash is still the old trusty of many, although less and less. According to the study The 2021 McKinsey Global Payments Report, The pandemic accelerated ongoing declines in cash use and the adoption of electronic payment method methods.
According to the study Study on New Digital Payment Methods made by kantareven when there is an obvious trend towards digital payment methods, we still value cash highly. This would be due to the fact that they have fewer charges and are more adaptable to specific customer profiles. But we cannot deny that the handling, collection, transport and processing of cash by banks and cash transit companies have become increasingly expensive.
It is not clear to us what the future of cash payments is. Will they still exist ten years from now or will they end up disappearing? We will have to wait and see how digital payment methods evolve. And it is that we estimate that this trend will continue for the next 5-10 yearsbut keeping cash and other payment options available to customers is critically important.
The rise of contactless methods
According to McKinseywe are in an ecosystem where payment providers are in constant competition to offer customized solutions. We can highlight the QR codesthe tap-to-pay methodoptions of mobile payment, banking apps or the link based payments. These changes make the contactless payment experience more seamless and satisfying for customers.
The number of non-cash transactions grew by 6% from 2019 to 2020. The use of e-wallets has grown as user preferences have evolved. According to kantarcontactless payment methods are predominantly used for daily purchases, general purchases in stores and online purchases.
In general, the use of contactless payment methods is more accepted among the younger generations and users more accustomed to new technologies. Spain is at the forefront of the adoption of contactless card payments in Europe. It’s an option they choose nine out of ten Spaniards at physical point of sale terminals.
BNPL
The famous Buy Now and Pay Later has experienced massive growth in recent years, highly related to the growth of the ecommerce sector. Generation Z is leading the charge. Thanks to them, alternative payment methods such as BNPL are gaining popularity.
Young people have turned to Buy Now Pay Later more than we could imagine. According to How Gen Z Shops and Paysstudy carried out by the consultant Oliver Wymanthe majority of consumers who choose to use the BNPL are under 35 years old.
They are looking for a payment method that does not make them feel indebted. 24% of Gen Z buyers use BNPL to avoid revolving debt. Young people do not feel that BNPL financing is a credit, but rather conceive of it as good money management by choosing alternative payment solutions.
cryptocurrencies
Cryptocurrencies have seen explosive and volatile growth. Or so the study says. Oliver Wyman.
In recent years it has gained considerable traction. 48% of Generation Z and Millennials have owned or currently own cryptocurrencies. Consequently, merchants are promoting cryptocurrencies as a form of payment. But let’s not trust. Although cryptocurrency payments can open up a range of possibilities, they also bring with them uncertainty.
What are the pros? They can allow traders to jump on emerging trends. But what about the cons? Buyers could face more fraud.
We also don’t know for sure whether cryptocurrencies can facilitate long-term cross-border trade. And it’s hard for merchants to manage returns and refunds because blockchain transactions are irreversible.
Ultimately, it may still be too early to say whether accepting cryptocurrencies generates new sales and customers or is simply an alternative form of payment.
super-apps
One of the consequences of digitization is that consumers want to have everything in one place, at hand. What do we mean by everything? Well, to have social networks, your e-wallets or delivery apps, for example, in the same application.
Super-apps are popular in emerging markets as they are easy to grow and evolve with younger generations. In Asia and America they are already common and will soon arrive more officially on the European market.
According to the study of Accenture, provide an experience in which mobile payments are unified will be one of the priorities for payment providers. It will be there where the difference is made to satisfy the needs of the clients.
person-to-person
The study of Oliver Wyman points out that the increasing use of person-to-person payments, also called P2P, is much most popular among young people than among older generations.
According to How the biggest mobile P2P payment players stack up of eMarketerby the end of 2023 annual transactions of a value of $1.152 billion through P2P mobile applications. By the end of 2025, they expect 62% of Gen Z in the US to transact through P2P payment apps. And we already know that what is successful in the US does not take long to reach Spain.
In conclusion, we can say that the pandemic has reinforced changes in user behavior when paying. And, although it is not clear which are permanent and which are not, the trend towards more digital payment methods in the long term seems clear.
