How Millennials and Gen Z are shaping the future of payments

How Millennials and Gen Z are shaping the future of payments

On 18 December 2023

Millennials and Generation Z are exerting a profound influence on the future of payments, driving a shift towards digital and innovative financial technologies.

A study conducted by the Association of Kenya Insurers (AKI) reveals fascinating demographic insights into the population distribution across generations in Africa. Generation Z stands out as the largest generation on the continent, comprising 31.2% of the total population. This generation, characterized by individuals born between the mid-1990s and early 2010s, totals 428,514,686. 

Millennials come second with a population of 281,467,270, they represent 20.49% of the total population. Millennials, born between the early 1980s and the mid-1990s, have played a pivotal role in shaping the socio-economic landscape with their unique values and technological advancements. 

In combination, Generation Z and Millennials jointly contribute to a significant portion of Africa's population, making up an impressive 51.69%. This demographic composition highlights the influence and potential impact of these younger generations on various aspects of society, from consumer behavior to cultural trends and political dynamics. 

Millennials and Generation Z love technology and find it super convenient. They've grown up with things like social media and smartphones, so using them is second nature. Because of this, they share a similar way of living and thinking, creating a strong connection between these two groups.   

To attract and maintain the loyalty of these customers, businesses must understand their payment behaviors and preferences. Recognizing how these consumers navigate and choose their mode of payment is crucial for crafting a simple and tailored payment experience. Whether it's preferences for digital wallets, contactless payments, or specific online platforms, decoding their choices enables businesses to align their services with the evolving expectations of these tech-savvy generations. By staying attuned to the intricacies of their payment habits, businesses can not only meet, but exceed the expectations of these consumers, fostering lasting relationships and customer satisfaction. 

How Millennials and Gen Z are shaping the future of payments: 

Buy Now, Pay Later (BNPL): 

Millennials and Gen Z are significantly influencing the payment landscape through the widespread adoption of Buy Now, Pay Later (BNPL) services. This payment method allows users to make purchases and spread the cost over installments, providing a more flexible and budget-friendly alternative to traditional credit. The appeal lies in its simplicity and transparency, aligning with the financial preferences of these generations who prioritize convenience and control over their spending. 

The difference between BNPL and a credit card lies in how they handle a customer’s balance. Credit cards usually apply interest if you don't pay the full amount by the next billing cycle. While some credit cards might have a temporary 0% annual percentage rate (APR), it's often for a limited time. Unlike BNPL, where payments are fixed, credit cards allow you to carry a balance or use your credit limit continuously, but this flexibility may come with the cost of accumulating interest over time. BNPL apps usually don’t charge interest or fees, and they have a fixed repayment schedule. You know your payment amounts upfront, and each payment will be the same. 

QR Codes:

The pervasive use of QR codes in payment transactions marks a notable shift in how Millennials and Gen Z approach financial transactions. These generations, accustomed to seamless digital experiences, find QR codes convenient for quick and contactless payments. Whether it's scanning codes for in-store purchases, splitting bills, or transferring funds, the simplicity and speed of QR code payments resonate with the tech-savvy preferences of Millennials and Gen Z.

 A study on mobile wallet trends indicates that millennials are nearly 50% more likely to use a mobile wallet to pay merchants with QR codes or near-field communication (NFC) tap to pay. The research also shows that over half of all millennials use mobile wallets for various tasks like storing cards, paying bills, transferring money between bank accounts, sending and receiving payments, and handling transactions. They also use these wallets for receiving notifications, keeping track of rewards and discounts, managing items like supplies, and storing digital versions of ID cards, tickets, boarding passes, or virtual keys. 

Going Contactless:

The move towards contactless payments epitomizes how Millennials and Gen Z are shaping the future of financial transactions. Embracing technology that allows for swift, tap-and-go payments, these generations prioritize efficiency. The convenience of contactless payments, whether through cards or mobile devices, reflects a broader trend towards reducing reliance on physical cash. As Millennials and Gen Z continue to drive this shift, businesses and payment systems are adapting to meet the demand for secure, quick, and contactless transactions in the evolving landscape of modern commerce.

Pesapal introduced a new way of making payment known as Supertap that allows customers to make payments by tapping their phones on PDQ machines to make payments, eliminating the lengthy process of dealing with till numbers or paybill numbers. This innovation is particularly convenient for Millennials and Gen Z, who value efficiency and swift transactions. Supertap aligns with the preferences of these tech-savvy generations, offering a quick and hassle-free way to complete transactions. This advancement not only simplifies the payment process but also reflects a forward-thinking approach in catering to the evolving needs of modern consumers. 

 Social and Peer-to-Peer Payments

Social and peer-to-peer payment systems are increasingly shaping the financial habits of the younger generation. Fueled by the digital era and the ubiquity of smartphones, these innovative platforms are integrated into the daily lives of tech-savvy individuals. Unlike traditional methods, social payments integrate with social networks and messaging apps, allowing users to effortlessly split bills, repay debts, or make small transactions without the need for cash or complex banking procedures. This emerging financial technology fosters a more interconnected and efficient financial landscape, empowering individuals to manage their finances with greater flexibility. As these systems continue to evolve, they contribute to the democratization of financial services, providing accessible and user-friendly solutions for individuals to engage in transactions within their social circles. 

Focus on Financial Inclusion

Financial inclusion is a central theme in the way Millennials and Generation Z are shaping the future of payments. With a strong emphasis on inclusivity and accessibility, these generations are propelling the development of financial technologies that extend services to previously underserved populations. Mobile banking apps, peer-to-peer payment platforms, and digital wallets are not only user-friendly but also instrumental in bringing financial services to individuals who may have limited access to traditional banking infrastructure.  

The push for financial inclusion aligns with the values of Millennials and Gen Z, who seek to bridge economic gaps and empower individuals globally. This focus goes beyond mere convenience; it represents a commitment to creating a more equitable financial landscape where everyone, regardless of socio-economic background, can participate in the digital economy. The evolving payments ecosystem, driven by these generations, is laying the foundation for a more inclusive financial future, where financial services are not only technologically advanced but also accessible to a diverse and often marginalized range of users. 

Security and Privacy Concerns

The pervasive influence of the younger generation on the future of payments is accompanied by an increased emphasis on security and privacy considerations. As these tech-savvy generations enthusiastically adopt digital payment methods, they are acutely aware of the potential risks associated with online transactions. This heightened awareness is steering the evolution of payment platforms to prioritize robust cybersecurity features.  

Read: Pesapal Attains PCI PTS Certification 

Millennials and Gen Z demand secure authentication methods, encryption protocols, and vigilant protection against fraud. Moreover, privacy concerns are paramount, with users seeking assurances that their financial data is treated with the utmost confidentiality. This collective focus on security and privacy is not just a response to the digital age's inherent vulnerabilities but reflects a broader societal shift towards a more conscientious and cautious approach to personal information, ensuring that the convenience of digital payments doesn't compromise the fundamental principles of user safety and data privacy. 

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Published In: Payments

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