Gen Z Consumers Love Their Debit Cards…For Now

While debit cards might be the preferred in-person payment method for members of Generation Z, don’t expect this trend to last.

A recent report from eMarketer finds that these digital natives expect they’ll cut back on the use of plastic cards in the future.

Gen Z consumers tend to be cautious about racking up debt, or are simply too young to quality for credit cards, making debit cards their preferred method of payment.

COVID-19 forced many shoppers to switch to contactless digital payments, and Gen Z — which has never known life without the internet — had no trouble adapting. This generation is at home with digital payment methods like Apple Pay and other peer-to-peer (P2P) mobile and digital wallet services, and nearly three quarters of them plan to use contactless payment methods even after the pandemic subsides.

Meanwhile, Gen Z shoppers say they anticipate reducing their use of cards in the future: from 35% to 26% for debit cards and 16% to 14% for credit cards. The number of consumers using P2P mobile apps will more than double over the next three years, representing 61% of Gen Z mobile phone users.

As for traditional financial institutions, Gen Z consumers tend to be skeptical, and say they expect to carry out most of their banking via mobile phone.

P2P Apps Increasingly Targeting Teens

The rising spending power of American teenager has led to a corresponding rise of P2P apps catering to this demographic.

Among these apps is Square, which recently began allowing teens between 13 and 17 to access its Cash App (the 40-million member community had previously required users to be 19 and over), a move that puts Square in competition for the teen market with mobile banking firms like Current, Greenlight and Step.

Teens who sign up receive a Cash App-linked Visa debit card, which they can personalize with colors, stamps, glow-in-the-dark capability and even hand-drawn designs. Teens will need parental permission before they can use the service, and parents have the power to limit spending and pause access. The digital shift stemming from the pandemic helped Square realize revenues of $546 million in 2021 — a 94% year-over-year increase.

To learn more about what’s happening in the world of debit cards, download the latest edition of Next-Gen Debit Tracker, a collaboration between PYMNTS and PULSE, a Discover company.