Move Over, Millennials — Gen Z to Start Calling the Shots in Payments

When we see what’s transpired in the past three years, the utility of long-term outlooks becomes clear as the businesses that paid attention to trendlines in 2020 in many cases survived and thrived under extraordinary conditions stretching into the here and now — and after.

In that spirit, PYMNTS’ series “Executive Insights: The Next Three Years” is asking experts in different sectors of the connected economy to break out the magic eight ball and identify trends shaping payments in the coming three years — a tough ask given historic levels of uncertainty.

Speaking with Synchrony Vice President of Innovation and Development Mike Storiale for the series, PYMNTS found members of Generation Z as the ascendant consumers, with their unique view of how to shop and pay emerging as a defining force in commerce and payments in the near future.

Commenting on a study of Gen Zs conducted by Synchrony, Storiale told PYMNTS, “Gen Z is really changing the shopping landscape as we know it. They’re shopping online differently. They’re using things like TikTok to search for the products. There are 7.3 million Gen Z workers in the U.S. already. When people look at Gen Z and think they are a small group, that’s certainly not the case.”

Not only are their shopping preferences different from other cohorts, but their payments partialities also play an important role from eCommerce to physical retail.

Storiale said Gen Zs “view their purchases very differently than generations that came before them. While they still favor things like debit over credit, their use of credit is on the rise. What we’re seeing is that they want to build a credit history.”

That’s creating a “really awesome opportunity” for retailers to give younger shoppers financing options where they are in their moment of need.

See also: Synchrony, Fiserv Team to Offer BNPL

The Spread of Embedded

In addition to their desire to become financially empowered, Gen Zs want to shop and pay in different ways from related cohorts like younger millennials. Gen Z believes the experience is just as important as the product, Storiale said — and that isn’t something many retailers outside of the luxury space are used to.

“They enjoy getting rewards and benefits for discounts and savings, like what we would expect from other generations,” he said. “But unlike some others, they’re shopping in channels that maybe feel different.”

Synchrony found 47% of Gen Z consumers have made a purchase through Instagram, for example.

Whether it’s rising Gen Z payment preference or the larger appetite for contextualizing digital commerce, embedded finance is seen as the prime enabler of new payments experiences. It’s not limited to younger consumers, as Synchrony sees embedded finance as a key driver of new commerce and payments experiences crossing generational boundaries in coming years.

“Embedded financing for us is really about bringing financing to a non-financing customer’s journey, putting banking or financing in places that you weren’t expecting it before,” he said. “Synchrony, among others, [is] well poised with the [application programming interfaces (APIs)] that we’ve built to enable that process.”

Bringing finance as experience forward in customer journeys creates new and different opportunities for retailers and brands to engage in ways they haven’t before.

Read also: Synchrony Financial Credit Card Delinquency Rate up to 3.1% in August

Lowering Identity Barriers

Powered by anywhere embedded finance, experiences can take several forms that, while familiar to the shopper, convey the new ease and personalization of connected commerce. Looking at what’s possible by bringing aspects of a consumer’s banking account data into journeys pre-shopping, Storiale said it’s starting to widen the aperture on experience.

“We typically think of banking at the checkout, that there’s going to be a credit offering at the checkout,” he said. “But maybe I’m going to bring that way further up the funnel and try to empower something. Or perhaps I’m going to use other aspects that the bank has.”

He said he also expects a reengineering of how merchants collect consumer identity data — or don’t — to make specific shopping journeys more seamless and less intrusive to members of rising younger demographics who are more cautious with their personal data than generations that came before.

Storiale said he believes new integrations can lower that burden, which is also a barrier to conversion.

“What I see coming in the next few years is the ability for organizations to grab pieces of digital identity, confirm or validate the information that they’re going to need to create those journeys, not only that are more seamless, but create better levels of trust than what I think we’ve seen in the past,” he said. “It gets you wondering how we could partner with retailers to perhaps help the retailers get the information they need, but make the customers feel like … this is coming from a source [they] already trust.”