The elusive millennial group (consumers born between 1980 and 1994), now aging into their forties, stressed credit card issuers with high student loan debt.
But now, here comes Gen Z, according to a study by Trans Union. This age cohort, born after 1995, is unique because they are “first generation digital natives” as TransUnion reports in a recent report titled “Your Guide to Gen Z’s Credit Behaviors and Preferences.”
Whereas Millennials graduated from college or started their careers in the midst of the historic recession in the late 2000s, many Gen Z consumers were in their formative childhood years and witnessed their parents and relatives struggle financially.
These experiences have shaped the perspectives and behaviors of these two generations, though potentially in different ways.
Many Millennials postponed typical milestones — getting married, buying their first home, and having children — and focused on careers that allowed them to have an impact on the world.
Consumers in Gen Z already differ from Millennials in important ways that will impact how they interact with their financial institutions. A Deloitte study found that more Gen Z consumers aspire to or prioritize traditional milestones.
TransUnion’s report looks at seven countries: Canada, Colombia, Hong Kong, India, South Africa, and the United States. Canada and the U.S. had the highest rate of Gen Z customers with active credit activity, with Canada at 63% and the U.S. at 66%.
Hong Kong was high at 29%, followed by South Africa at 28%. Lagging were Colombia and India with 19% and 6% respectively. These numbers are generally consistent with mature economies being heavy credit users.
For credit card lenders, life should be good over the next decade.
Our findings dispel the myth that credit cards have fallen out of favor with younger consumers in favor of debit cards or personal loans. In established credit markets, credit cards were Gen Z’s most widely held product.
As more of these consumers are graduating college or demonstrating income from a job, they are interested in — and receiving — cards.
Credit card managers: sleep well, the market will do nothing but grow.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group