Millennial and Gen Z consumers have been impacted the most by the latest financial crises. Both have been financially affected by the Great Recession of 2008-2009 and the pandemic. These events have caused significant unemployment rates and negatively affected many consumers' credit scores. Because of these event outcomes, younger generations have an increased anxiety about money and debt.
Mobile/Contactless Payments And Economic Stress Are Key Driving Factors
In addition to the increased anxiety about money, the pandemic has greatly affected consumers' payment preferences. Consumers have moved away from cash significantly where mobile, contactless, and p2p payments have become more prominent, with younger generations taking the lead.
A survey commissioned by CardRatings conducted among more than 2,000 adults suggests that Millenials and Gen Z consumers are preferring Debit over Credit cards as they are more debt-conscious than older generations. The same survey reports that nearly 7x more participants aged 18-34 have “limited/no credit history/score” than consumers aged 35 plus. One of the Gen Z participants from the survey stated “While living a more hectic college lifestyle than most students my age might, keeping track of additional credit card payments is another potential deadline to miss.”
According to an Interac survey conducted in Canada last fall, over half of Gen Z and Millenials are both “using digital payments to track their spending and say paying with debit helps them feel in control.”
Pandemic Fueled Debit Use
Year over year, US debit-card dollar payment and purchase volume rose 23% ending in Sept 2020, which was more than double the pre-pandemic rate.
The WSJ suggests increased card use online and in store for everyday items such as groceries, gas and home goods are often debit purchases.
In addition to the increase in Debit card use, BAI Banking Research found that Gen Z consumers want better customer service, and a standout mobile experience. 75% of Millennials said they would switch providers for a better mobile experience.
As mentioned before, many consumers are using less credit during economic stress and are significantly worried about debt. Some consumers may have also been cut off from credit as lenders are taking on less risk.
Although we have seen an increase in debit use amongst younger generations, it’s very likely we will see a rise in credit card use as we enter economic recovery. There are an emerging number of Gen Zers who are interested in building credit and are keen on rewards.