April 20, 2017

Generation Z: Cash or cards?



Today’s youngest generations with purchasing power, millennials (college students and young professionals) and Generation Z (junior high and high school students) are digital natives. They grew up with computers at their fingertips and in their pockets. 

Gen Z alone makes up more than 25 percent of the total U.S. population and its members represent $44 billion in annual purchasing power. They strive for convenience and immediacy in all aspects of their lives and have completely different financial goals and spending habits than their parents.


Given these facts, you’d assume they prefer cards or mobile payments to cash, right? Not so fast. A recent Interactions Marketing study of more than 2,000 respondents between the ages of 14 and 19 found “64 percent of Gen Z prefers to use cash as their method of payment vs. credit and debit cards,” meaning their consumer cash habits align with those of older shoppers.


On the other hand, 2016 Google research found 2 out of 3 members of Gen Z make purchases online, and of those, half of them are buying from their smartphones. That study, of 13- to 17-year-olds compared to young adults and adults, found teens prefer to shop online for exactly the reasons you’d expect:

  • 61 percent say it’s more convenient
  • 49 percent say they can find better deals online
  • 48 percent say shopping online lets them see multiple brands and retailers without leaving home
  • 41 percent say it’s faster than going to physical stores


So where’s the disconnect? Why do some teenagers prefer using cash, and others shopping on their mobile devices with credit or debit cards? The differences might come down to a few simple factors:

  • Many teenagers are likely making the majority of their online purchases using their parents’ cards.
  • The younger half of Generation Z is still unable to drive, so shopping and buying online is much easier for them than going to a physical store.
  • However, teenagers often have jobs – like babysitting or lawn work – that pay in cash. Having cash of their own to hold and spend makes them feel powerful and independent.
  • Gen Z also likely has low credit limits, making it more difficult for them to spend easily on cards – again, unless these cards are loaded or paid off by their guardians.


Since two of the primary reasons Generation Z seems to prefer mobile and online shopping hinge on their lack of independence, what will happen to their preferences, and the future of cash, when they’re on their own? While paying virtually will likely become easier, so will the security risks that accompany it, and if anyone understands the magnitude of those risks, it’s the digital natives.


In any case, it’s best practice to make sure paying with cash and paying virtually are both easy, accessible options for your customers of all generations. But keep in mind that Interactions Marketing found being able to buy online or in store doesn’t even reach the top five factors Gen Z considers when making a purchase. Instead, they consider:

  1. Price
  2. Quality
  3. Brand name
  4. Social responsibility of the brand
  5. Environmentally friendly products


Don’t discount Generation Z in your retail branding and marketing. If the generations before them are any indication, their purchasing prowess – both virtually and physically – will only continue to grow as they age.




Image: iStock