Figuring out how to attract Gen Z should be a top priority for merchants today. They may be young now, but in 5 years they’ll be “the fastest growing generation in the workplace.”
But it's not just their influence and spending power that makes them a prime target for retailers today. They represent the next generation of shoppers whose preferences differ greatly from generations before them.
They demand more from retailers. They demand tech-savvy digital payment options. Not only that, but they demand a heightened customer experience. For merchants to capture the loyalty, and ultimately future buying power of Gen Z, they need to adapt to meet their unique demands and preferences.
This is a mobile-first generation. 72% of Gen Z shoppers regularly turn to their smartphone to shop online. And it's not just the way they shop that's different. Their purchasing preferences also differ greatly from the generations before them.
First, they grew up in an economic crisis that left them untrusting of banks and credit.
The majority of Gen Z aged consumers don't use credit, preferring to pay with cash or debit. They have a greater awareness of alternative payments and are more comfortable using them than the rest of the population. In fact, they prefer them.
They use cash, but that's largely due to their aversion to credit use. Studies show that this generation clearly prefers alternative payment methods and would use them if they were more available. Of Gen Z aged consumers, 53% say they prefer stores that offer contactless payments over ones that don’t.
Also, they're the first generation that is a digitally native generation. They're comfortable with digital transactions of all types. They readily adopt APMs (alternative payment methods) and demand the newest and most advanced options. The current growth and diversification of the payments landscape is largely driven by the demands of this younger, tech-savvy generation.
But this comfort with tech also makes them more prone to digital fraud. They don't have a healthy bit of skepticism towards digital as they do credit.
Of course, marketing to this generation is different. But getting them to buy and keep buying is about building trust and offering the payment options they prefer. That means merchants are going to need to rethink their Payment Processing strategy to meet the unique preferences of the future consumer.
This young generation is very concerned about the impact of fraud. 95% believe that banks should be increasing fraud protection. Anti-fraud software helps protect consumers from fraud. But it also increases friction at the checkout. And it can lead to increased false declines.
Unfortunately for merchants, these young purchasers take false declines personally and are not very forgiving about it. Auto declining flagged orders means lost customers and about $118B in yearly revenue.
Customer experience is a high priority for this generation. And because of that, merchants don’t have as much wiggle room for mistakes as with older generations. In a recent ClearSale survey, 45% of Gen Z said if a merchant declines their order, they won't shop with that merchant again. Moreover, 42% indicated a declined purchase would cause them to post negative comments on social media.
Fortunately, merchants can fight fraud and provide great customer service with a few tweaks to their fraud strategy.
If you're getting a lot of false declines, pay attention to which channel is the most affected. Instead of auto declining flagged orders, merchants should use a combination of tech and human oversight.
The beauty of AI is that it's not one size fits all. AI can be tailored to the market on each channel you market through. If you're getting a high incidence of false declines, reconfigure the AI to analyze data sets particular to the channel that's getting the most false declines.
AI is a great tool, but it can still miss certain factors. This is where manual reviews of flagged orders can fill the gap. Manual review can take into account certain aspects of order data and use this information to determine whether the order is fraudulent or not. This way merchants can protect themselves from fraud while reducing their incidence of false declines. Especially since we know false declines result in lost revenue and lost customers.
Machine learning analyzes data sets from all orders, approved, declined and manually reviewed. It uses this information to get better at detecting good orders from risky ones. This way merchants can deliver a safe, yet pleasant, customer experience while also increasing fraud detection. And because machine learning gets better over time, it can eventually reduce the need for manual reviews.
These strategies allow merchants to maximize fraud protection while meeting the high standards for protection and CX of Gen Z consumers.
For merchants to remain relevant and gain Gen Z loyalty, they must understand that they’re digital natives with a preference for m-commerce. Taking a mobile-first, omnichannel approach will allow merchants to offer the customer experience Gen Z demands.
Considering the preferences of the next most influential generation must be a priority for businesses. This younger generation is the first to be totally digitally native.
They’re aware, understand and embrace alternative payment options at the checkout.
If businesses are to be successful and relevant to this generation, they will have to meet their demand for choice. They possess a fully mobile-first philosophy. They fully expect to be able to purchase and make payments anywhere, anytime, and from any device they want.
Optimized payment options at checkout, in-store, online, and in-app bring a seamless and frictionless customer experience. Especially as mobile commerce benefits from the enhanced capabilities of 5G. Gen Z are already digitally reliant, and that will only increase as functionality increases.