Generation Z: Driving the adoption of online cash

From mobile wallets to voice-activated technologies, biometrics, and checkout-free shopping, Generation Z has embraced alternative payment methods more than any other group of consumers.

But when it comes to paying online, our latest Lost In Transaction research discovered that it’s cash that’s becoming increasingly king.

39% of Gen Z consumers —aged 25 or younger — are habitually making online purchases using online cash or cash replacement systems. In comparison, only 30% of Millennials (consumers aged 25 to 39), 24% of Gen Xers (consumers aged 40 to 54), and 16% of Baby Boomers (consumers aged 55 to 74) told us they make regular use of them.

More awareness, more adoption

The fact that Gen Z consumers use online cash more than consumers in other age groups isn’t surprising, even at first glance. This is because Gen Z are the most aware that online cash exists.

According to our research, 68% of Gen Z consumers have heard of online cash, compared to 58% of consumers in all other age groups. At the other end of the spectrum, the customers who are least likely to pay with online cash — Baby Boomers — are also those who are least aware that paying online in cash is an option. Only 51% told us they’ve heard of this payment method.

At the risk of stating the obvious, awareness is a crucial first step to adoption for any type of product or service. If consumers don’t know a product or service exists, it might as well not exist.

That said, wider awareness isn’t the only reason why online cash is most popular with Gen Z.

68% of Millennials are also aware of online cash. But where that 68% has led to 39% habitual use by Gen Z consumers, only 30% of Millennials are paying online in cash on the regular. Similarly, while awareness of online cash is lowest amongst Baby Boomers, it’s also true that 51% is more than half of the people we surveyed in that age group.

So what other factors could be driving the adoption of online cash by Gen Z?

Privacy matters

According to our research, younger generations don’t have the same security concerns as older consumers when it comes to trying new payment methods. As digital natives, Gen Z in particular are more likely to trust new technologies.

That said, when it comes to online privacy, it’s a different story. Here, Gen Z consumers tend to have a conservative attitude.

According to research from Jaywing, a marketing and advertising company:

• Two in three Gen Zers have adjusted the privacy settings on their social media accounts
• 75% will only allow location sharing if it’s necessary for apps to function
• A massive 87% consider online privacy to be more important than popularity or “likes”

Products such as Paysafecash and other online cash replacement systems feed right into this preference for online privacy, while also being convenient.

Customers can scan a barcode and pay at their nearest payment point in their own time. More importantly, there’s no need to disclose any financial information or personal details. Instead, privacy-conscious Gen Z consumers can pay safe in the knowledge that they can stay anonymous.

For the avoidance of debt

Privacy aside, there’s also another factor that could explain the growing popularity of online cash amongst younger consumers.

Where older consumers prefer paying with their credit cards, only 39% of Gen Z consumers habitually use them in online transactions. And while, in part, this is probably because Gen Z has less access to credit due to their age and other eligibility factors, their attitude to debt matters too.

Some studies suggest Gen Zers are growing more comfortable with credit. In the US, for instance, the number of Gen Zers who own a credit card shot up to 7.7 million between April and June 2019 — a 41% increase over 2018.

That said, Merrill Lynch’s Early Adulthood: The Pursuit of Financial Independence report found that only 19% of Gen Zers think success means being rich. For 60%, success means being debt-free.

The upshot is that this attitude may make Gen Zers reluctant to make use of credit cards, particularly for smaller purchases. Online cash may well be bridging this gap, allowing them to access online products and services without resorting to this.

Looking ahead

Whether it’s due to privacy concerns, lack of access to or dislike of credit, or, more simply, convenience and personal preference, it’s clear that Gen Z wants more autonomy at the checkout. And that means providing them with the means to pay online in cash.

Younger consumers are well-informed about different payment methods and don’t want to be forced into using a payment method they dislike. And this means that, to attract this increasingly important consumer segment, delivering more choice at the checkout, including online cash alternatives, is a must.

Want more insights on Generation Z’s attitudes to online shopping and payments? Download Lost In Transaction: Gen Z expectations at the checkout