For example, lawmakers in Pennsylvania, New York, California, and New Jersey have introduced or passed legislation that prohibits businesses from refusing to accept cash payments. There are more than 400,000 ATMs in the US, of which 48% are bank-owned (see below). The stock price appreciation in PayPal, from that note's publishing, has been significant. As our survey proves, Gen Z is pushing the US payment environment towards P2P and mobile payments. While cash still represents roughly 30% of all UK transactions, estimates believe cash payment share will fall below 10% over the next decade. We doubt consumers are excited to load apps onto their phone if they only plan on using it 1x or 2x per year. Consumers demand convenience, privacy, and transparency and do not want to be forced into certain behaviors. In Kenya, M-Pesa accounts for more than 50% of the country's GDP. Merchants are dying to reach their consumers and build a deeper relationship with their valued customers. APMs like digital wallets reduce the need for a rigorous application process, which plays Despite this, the daVinci study found that 85% of Gen Z are not eligible to participate in work rewards programs. For widespread success, it will need to have the proper protocols and security standards that the networks advocate. Unfortunately for big names like Visa, chip-in-card technology)? Do you want to leave your phone with the waiter or bartender? These tech-enabled payment methods also promise faster checkouts, sans the We then wanted to understand which brands and players are the most popular. The US has been slow to adapt, but we are encouraged by recent advances. Like any revolution, there is a significant amount of unpredictability and uncertainty. • An examination of today’s bill pay ecosystem Specifically, we inquired when they expect traditional retail stores (i.e. Sixty-eight percent of Gen Z’ers say they want instant person-to-person payments. The transaction occurred quite quickly and our credit card funding source was automatically charged. Gen Z is embracing technology and it believes in the mantra of "faster and cheaper". Some merchants want an easy one-click experience, to improve their digital checkout process and help lower their cart abandonment rates. Gen Z adults between ages 18 and 21 prioritize making money and having a successful career, according to a new report from Morning Consult … issuers and banks) will be protected. For the second year in a row, we were surprised that younger generations are not showing a preference for mobile payments. Manole Capital wrote a detailed note on PayPal back in September of 2016, which can be read by here. As our last note proved, banks used to believe that their position was an insurmountable barrier to entry. Credit cards were second at 35%. Last year, card usage combined to equal 78%. this influential generation also grew up amidst economic turmoil. However, we believe that personalization has become increasingly important in today's society. Consumers should always be allowed to pay in whatever form they wish. New regulations and technologies are creating both opportunities and challenges to the financial services industry. Banks had the benefit of distribution, brand recognition, trust, regulatory backing, and funding advantages. This is a preview of the Banking and Payments for Gen Z research report from Business Insider Intelligence. Growth At Reasonable Price, Long/Short Equity, Registered Investment Advisor, Follow Manole Capital Management and get email alerts. Despite only getting 8% of our survey results, we believe that Zelle is the biggest threat to PayPal's Venmo product. Please subscribe to our newsletter to receive consumer data insights and daily analysis from Mercator analysts and industry experts. Early adopters and certain enthusiasts might have embraced mobile wallets, but it really has fallen flat. Time will tell…. We recently used our mobile phone to make a purchase at Panera. "In fact, 88% said they only want to invest in companies that share their values, compared to 79% of millennials, 77% of Gen Xers and 69% of baby boomers. pragmatic about their spending. Whether it is a phone, wearables or other types of interfaces, digital payments are coming. Although cash usage is prevalent, in-store they have a clear preference for alternative payment methods. Research from similartech.com shows that PayPal has 7% market share of the Top 10,000 online sites versus Visa's Checkout and Mastercard's Masterpass at a paltry 0.25% and 0.41% respectively. All of this occurs in a few seconds and the transaction can be verified. Fintech is beginning to touch consumers and businesses in new and exciting ways. Other than their familiarity with the internet, The Fintech market is dynamic and the certain players are extremely aggressive. Gen Z is accustomed to making purchases on their mobile phones and is not inclined to carry and use cash for purchase transactions. Currently characterized as self-aware, persistent, realistic, innovative and […] There should be a cost of card acceptance, for its convenience, safety and elevated purchasing power. There is an opportunity for existing financial services companies to think differently and combine their experience with the agile nature of financial technology. Speaking of paying, while those in Gen Z are more conservative with money than recent generations, they have more access to digital payments. Why was the US the last developed country in the world to embrace EMV standards (i.e. A cultural shift towards cashless payments is underway. Gen Z is more interested in digital payments products and services than any other generation. On Monday, March 25th, a much publicized partnership between Apple and Goldman Sachs was announced. This rapid growth, among this demographic, should bode well for future monetization of the Venmo asset. What purpose is this signature providing, as the Panera employee certainly is not going to compare our signature to that on our plastic card. Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Mercator Advisory Group analysts and industry professionals. Are there any new marketing tactics the credit card companies are using to entice Gen Z? While the technology and tokenization are critically important, do not underestimate the importance of global acceptance. Only time will tell…. PayPal's growth, especially among Gen Z and Millennials, has been impressive. For the few Gen Xs and Baby Boomers that participated, we appreciated your participation, but you ruined our age demographic. Want an example of merchants negatively impacting mobile phone payment adoption? The changes will not happen overnight but will occur over the next 5 to 10 years. There quite possibly is no larger market than payments, especially when one considers currency movements between and inside of countries. Mercator Advisory Group’s Director of Debit and Alternative Products Advisory Service. Major credit unions also have vast ATM networks. If their application does qualify, young consumers are met If the payment networks can help create a loyalty or reward program for these worried retailers, that would be the ultimate solution. In addition, this process also allows for physical card optionality. traces the decline of credit card ownership among young people back to the 2009 CARD In an increasingly changing commercial landscape, From what we gathered, only 1/5th of our surveyed group visit an ATM every week (5% use an ATM a few times a week, while 15% use one 1x a week). The technical specifications and branding of this new "shared buy button", for online purchases, will take months, if not years. Some may get a special spot, like Starbucks or Dunkin'. With an average transaction size of $265, Zelle seems to be for much bigger consumers, than typical Gen Z users. As this Bankrate.com chart shows, the average ATM fee has risen from roughly $2 in 1998 to almost $5 per transaction. At the forefront of China's mobile payment adoption are Alipay (owned by Ant Financial) and WeChat Pay (owned by Tencent (OTCPK:TCEHY)). Digital-First cards (Apple, GS, and MA). It’s clear that money is a motivator to stem attrition, but for Gen Z the payment functionality of prepaid is an essential element in how it gets delivered and used. 39% of Gen Z consumers —aged 25 or younger — are habitually making online purchases using online cash or cash replacement systems. Why international markets are ahead of the US. 14 percent of Gen Z prefers to pay via credit card. However, authentication via a fingerprint or facial recognition is not terribly faster than swiping a piece of plastic at the POS. 29% of our group expect it will occur between 5 and 10 years from now and 6% believe it will take over a decade. Mastercard brings Apple 50 million merchants and an acceptance network recognized around the world. Millennials are often seen as the most digitally savvy generation, but they were actually raised during a time when the internet was still nascent technology. the traditional systems in place, resulting in fewer people owning credit Users have embraced their smartphones for everyday transactions like food at street food stalls, highway tolls, bus fares, taxis, subways, etc. Meanwhile, only 10% of non-Gen Z consumers use mobile wallets regularly; When it comes to their preference for mobile eCommerce, Gen Z and Millennials shared the same level of interest, at 47%. An enormous shift is occurring and it will impact all financial service companies. Without a credit history, Discover Card kicks 5% cash back on purchases, doubles rewards points, and provides a $20 statement credit for those with 3.5 GPA. Simply stated, the magnetic stripe, which is a +50 year technology, works pretty well. However, it is important to recognize that cash usage is likely here for the foreseeable future. Manole Capital's second annual Gen Z Survey. I have no business relationship with any company whose stock is mentioned in this article. Transaction volume grew an impressive 72% to 147 million transactions. Other than the financial crisis, Petal Card Unfortunately, these measures only slow down the inevitable. lengthy forms asking for personal information that Gen Z consumers are While some may be viewed as controversial, it is simply intended to serve as possible Gen Z and Millennial perceptions. From our survey results and broader trends, it is safe to say cash will remain an option over the next decade. The PSCU 2019 Eye on Payments survey revealed that cash was Gen Z’s second most preferred form of payment at 34%. Our survey began by asking respondents a series of questions regarding their thoughts, usage habits, and preferences for the payments industry. As long as the payment is card funded, whether it is plastic or digital, the payment networks should be the ultimate beneficiaries. Why mess with a good thing? These merchants wanted lower acceptance costs and also wanted to create a loyalty program benefitting all merchants in their network. Last year, the networks (Visa, Mastercard, American Express and Discover) began to explore a common user-interface for Secure Remote Commerce (SRC). Without getting too technical, Mastercard is bringing significant technology to Apple's / Goldman's product. To keep up, retailers should explore options to make their payment processes quick and easy. This was a good concept, but the reality was very different. To keep up, retailers should explore options to make their payment processes quick and easy. Early analysis shows that Gen Z consumers are less concerned about brands, labels, or even corporate names. Zelle P2P payment service owned by the traditional banks. If it can be streamlined, with little friction, it can gain market share. The technology needs to change and we believe the payment networks are the key. We are pleased to have GPAs over this threshold, but we do not believe that Discover Card verified our GPAs to get our $2,000 line of credit. notes wields a formidable purchasing power of $143 billion this year, Petal Card Nearly half of the Gen Z … Not to our surprise, 96% of our respondents have used mobile payments, which is a 19% increase from last year's results. (Source: CrowdTwist) 29 percent of Gen Z spends most of their free time trying to earn extra money. have credit cards — about 50% of them do — but the generation is far more Once again, the goal is for consumers to transact in a convenient and secure way. How Millennials and Gen Z make purchasing decisions and what they look for in a brand is shifting. Top stressors for millennials include not saving enough (35 percent), concern about their career path (24 percent), and whether they are planning enough for retirement (21 percent). Manole Capital's second annual Gen Z Survey. Witnessing We believe the phone is the answer for payments and commerce. Manole Capital exclusively focuses on the emerging Fintech industry. Generation Z are the anti-time wasters. Apple Pay is now accepted at 65% of all US locations and 74 of the top 100 US merchants, but it continues to struggle with driving transactions and usage. They have notoriously short attention spans. Specifically, we address cash versus card usage, mobile payments, P2P (person-to-person) payments, and ATM usage. Simple right? It is our opinion that all of these changes will occur because of tokenization. There are other factors involved in no longer using a wallet (i.e. The goals for this change were simple. Gen Z is Leading the Way to Alternative Payment Options. This was not the first attempt for the networks to push mobile payments and garner more online market share. 20% stated 5x to 10x per week and 8% said they are using mobile payments more than 10x a week. In 2017, the average American carried $50 in their wallet. If you did not have an opportunity to read our last survey note (on the banking sector), please click here. In addition, we think that out-of-network ATM providers will struggle in the future. To make a simple statement, on a very complex payment process, security measures are needed to provide users with a digital ID instead of easily compromised cardholder information. Gen Z has access to credit and the potential for debt — but that doesn’t mean they take advantage of it. Geographically, 96% of the sample lives in the United States, while the other 4% are from South America, the Middle East, Africa, and Europe. We forecast that Apple Pay is more likely to gain market share among our Gen Z demographic, but there is no denying Zelle's impressive statistics. To begin our mobile and P2P analysis, we wanted to learn how many of our respondents use mobile payments, and especially how often they use them. I have no business relationship with any company whose stock is mentioned in this article. Gen Z likes the automated ability of digital payments, so it’s not a huge surprise that the majority of respondents (>50 percent) reported that they currently receive payment from their employer via direct deposit (ACH). Instead of stating how people can pay one another, it is now commonplace to say "I'll just Venmo you the money". We expect the frequency of use to continue to climb in the mid-teens for the foreseeable future. Now, those companies that are embracing technology are gaining market share. The majority are accustomed to the ease of sending or receiving person-to-person payments. How Modernization Benefits Everyone in the Bill Pay Ecosystem, Credit Usage and Spending Trends in the COVID-19 Era, Combating False Declines with Dynamic Identity Data, Issuers Beware: Modernize Payment Card Portfolios, or Risk Being Left Behind, Automating AP Processes Enables Companies to Succeed in the New Workplace Normal. 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