The latest figures from Bank of Ireland may be the strongest signal yet that marketers can no longer ignore Generation-Z when it comes to the future of money.
In 2017, contactless use among their customers grew 140%, amounting to an additional 2.25 million transactions on the previous year. This is a huge change from 2015 when a survey found 1-in-3 people nationwide did not know what contactless was, even though most people had a contactless card.
But the interesting bit concerns who is adopting contactless.
Generation-Z catching up fast
While older Millennials and Generation-X remain the biggest users of contactless (BOI customers aged 31-39) , it’s Generation-Z (21 and younger) who are adopting contactless most rapidly: use among the bank’s 15-19 year-old customers has grown 290% and the amount they are spending surged 409%.
Based on what we now know about this relatively enigmatic generation, this makes sense.
In November 2016, Core Media conducted the Future of Money survey exploring the readiness of four Irish generations to adopt emerging payment technologies like mobile wallets, peer-to-peer payments and connected devices.
It showed that Millennials would drive initial adoption of contactless cards and mobile wallets given their greater experience with banking and access to new phones and services. But it also showed Millennials are tethered to the past, less likely to go too far, too soon beyond mobile wallets.
Generation-Z are much more comfortable with where the world is headed. They believe most strongly in a cashless Ireland by 2030
By contrast, Generation-Z are much more comfortable with where the world is headed. They believe most strongly in a cashless Ireland by 2030, are most trusting of tech brands like Google and Apple to provide alternative ways to pay and bank, and expect a wider range of brands like Snapchat and Facebook, to do the same.
Ironically, younger Gen-Zs are still tied to cash, living off the bank of mum and dad, but Bank of Ireland’s latest data suggest that once they reach a certain age, these true digital natives, as they come of age and see the benefits of quick and painless cashless transactions, are hungry to embrace contactless. transactions.
Just the start
With peer-to-peer payments and connected devices just on the horizon, we can expect Gen-Z to drive adoption of many new payment technologies over the coming years, in turn driving changes in consumer expectations.
We can expect Gen-Z to drive adoption of many new payment technologies over the coming years
Firstly, as smartphones replace other payment options, mobile shopping will take off and it will matter much less ‘where’ people pay, online or offline. The Future of Money survey showed Generation-Z is most prepared to embrace mobile banking and mobile shopping. A recent PwC survey found 30% of Irish people treat their mobile as their main shopping tool, but only 46% of Irish SMEs’ websites are mobile-optimised and only 9% are set up to process payments online – we can only expect that businesses’ need to adapt to this will only intensify.
Secondly, as our financial lives become more virtual and more complex, people will have greater need to see and ‘feel’ their money in real-time. Among Bank of Ireland customers, 78% of their contactless customers also use their online banking service, suggesting a strong connection between cashless transactions and their strong desire to manage their money.
Similarly, the Core Media survey found that Generation-Z was significantly more interested than all other generations in apps that helped help them track their financial health in one place. While available in the US through apps like Mint, European regulations to make this possible will only come into effect in 2018, but demand may already here.
Have we reached a tipping point?
Cashless transactions, mobile shopping and real-time money management are just three elements set to transform business and retail. But when?
A tipping point is said to happen when ‘Innovators’ and ‘Early-adopters’ comprising 16% of a market adopt a technology, beyond which it spreads through the population rapidly.
Analysing national demographic data, we calculated that a tipping point for mobile wallets or peer-to-peer apps would reasonably be reached if 40-50% of Ireland’s Millennials and Generation-Z adopted them – 16-20% of the population.
We may have 4-5 years before Generation-Z, alongside Millennials, drive mobile wallets mainstream
This suggests we may have 4-5 years before Generation-Z, alongside Millennials, drive mobile wallets mainstream. But this will only be one of many tipping points more disruptive technologies like peer-to-peer payments, connected devices, and others follow.
Latest figures from the UK show just how quickly things can change – a Payments UK study predicts that debit card transactions will overtake cash transactions in 2018, three years ahead of schedule, with 1-in-3 of all transactions being contactless.
These latest figures from Bank of Ireland are the strongest indication we have of the critical role Gen-Z will play in driving these technologies towards tipping points in years to come, perhaps sooner than we expect.
What should businesses think about?
These new technologies are going to impact every market, brand and retailer in Ireland, and quite likely sooner than we may think.
What can we do? In the immediate term, there are a few things businesses need to start thinking about.
- Prepare now
A far wider range of payment options will become the new normal. It may seem the impacts of mobile wallets, peer-to-peer payments and connected devices may be very far off, but as we’re seeing with contactless adoption, new technologies can take off very rapidly after a long lead-in. Brands adopting these technologies early can benefit from first mover advantage, especially among Gen-Z, who prize utility above all else.
- Think mobile-first
As mobile commerce and mobile payments grow, brands will have to ask: are they giving customers the shopping and payment options tomorrow’s customers will want? Is their website designed for mobile? Are they thinking now about how they can benefit from new mobile transaction technologies?
- Sew in seamlessness
Gen-Z in particular already expect to move seamlessly across channels and devices, and brands will lose out if they don’t make their customer experiences as convenient, simple & useful as possible. The challenge for brands is dealing with increasingly fragmented paths to purchase. Recent research from Forrester shows that seamlessness is a strong driver of brand loyalty for Gen-Z.
- Re-imagine roles of online & offline
Seamlessness also extends to how brands integrate their online and offline shopping and payment channels. As more shopping takes place online and on mobile, the role of the brick-and-mortar store is changing with some prioritising experience, others convenience. Retailers will have to re-think the role their physical stores in the context of the ‘omni-channel’ shopper, offering them multiple ways to pay.
- Give Gen-Z what they want now, because they’ll want more later
If your brand is looking to do business with 16-21 year olds, even if they only represent a small section of your target today, start considering now how you can begin to tailor a concurrent and simple retail experience just for them – something which caters to their desire for utility.
While many businesses are, undoubtedly, already adapting to these changes, Bank of Ireland’s new data highlights how no one can afford to be complacent about when these emerging technologies will take-off and the impacts they will have on consumer behaviour, business and marketing strategy.
And rather seeing these technologies as risks to business, we need to better understand how adopting new payment technologies early can create huge opportunities, especially for those brands that move first.
If your brand or business is looking to get ahead with Gen Z, we’d love to hear from you. Contact the Core Strategy Unit if you want to know more about these technologies and impact on business and marketing.