However, the integration isn't quite complete, and research shows that many users still prefer physical cards.
This is an interesting statistic that the commercial industry should be aware of and act upon, even as it continues to push for digitalization. In this article, we'll delve into the details of this statistic and explore how it informs both users and service providers.
The Research
A study conducted among the UK Generation Z revealed an interesting phenomenon. The youngest generation of shoppers prefers using physical cards when shopping and uses them on almost a daily basis. As many as 63 percent of Gen Z shoppers prefer to use a card over a digital wallet. The number is even higher for boomers at 77 percent.
The research also shows that users insist on using the cards, not just prefer them. This is an interesting development, given that this generation is the most tech-savvy.
The poll also shows that only one percent of Gen Z shoppers use digital wallets as their preferred payment method.
Use of Digital Wallets
At this point, there are approximately 3.4 billion digital wallet users worldwide. That's approximately 43 percent of the world's population. It's supposed to rise to 60 percent by 2026. However, some predict that it won't, as it's the younger generations that are starting to refuse it.
Global transaction volume is approximately $9 trillion per year, and it's expected to rise, potentially tripling that amount by 2028. An average US user spends approximately $3,600 a year using their digital wallet alone.
Crypto Wallets
As of the time of ]writing, there are approximately 220 million users of crypto wallets. The numbers are also increasing every year as cryptocurrency becomes more widely accepted. About 30 percent of users make daily transactions using their wallets.
Even the world of cryptocurrency mining is no longer tied to expensive physical equipment. Instead, it, too, is digital, and the best Bitcoin miners use apps that pool the resources of different investors. Such an approach is far less expensive and less damaging to the environment, as crypto mining consumes a significant amount of energy.
Gen Z Complaints about Digital Wallets
Gen Z members have a few different complaints about the use of digital wallets, most of which are somewhat justified. Some of these are about the attitudes that generations have toward finance, and others are about their attitudes toward technology. Many have noticed that, in both regards, Gen Zers are different from previous generations in that regard.
Fear of Hacking
Many Generation Z claim that they don't trust digital wallets as they are afraid of hacking and losing their assets and personal information. Hacks pose a threat to digital wallets, but wallet providers employ numerous security measures to mitigate this risk. Users can also implement safe practices to increase their overall security.
Distrust in New Tech
Many have observed that Gen Z is less tech-savvy than previous generations and less inclined to adopt new technology. They also show distrust towards new technology in general, and digital wallets are included in this.
Skepticism of Biometrics
Digital wallets often utilize biometrics to enhance security for their users. Biometrics are also more convenient than using any other password to protect the assets. However, Gen Z users often prefer not to provide their fingerprints or any other biometric data to a digital wallet provider. As biometrics become more invasive, with the use of eye scanners and even blood samples, the distrust will increase.
Digital Wallets Introduce Physical Cards
Some digital wallet companies have adopted a new business model in response to the behavior of their Gen Z users. They used to be digital products only, but they wanted to branch out and find a customer base among younger demographics.
This has led them to introduce physical cards connected to their wallets as a part of their overall offer. Such an approach makes Gen Z users more comfortable, and as they become a larger part of the market, the companies will continue to adjust to their needs.
Joe Zender, Chief Product Officer at Zilch, commented: "Digital payments have been transformational for shoppers, but consumers of every generation are holding onto their physical cards. People still love to know they can buy what they need even if their phone's battery runs flat. That's why we're giving people the option of having a new physical card, so they can get the full benefit of using Zilch whichever way they pay."
Environmental and Ethical Concerns
When digital wallets were first introduced, they initially appeared to be an environmentally friendly option, as they neither required nor generated plastic waste. A completely digital product never had to be replaced and couldn't be thrown away. However, the day-to-day use of digital products and public awareness of how they work changed this outlook.
Digital wallets consume a significant amount of energy, especially when designed for cryptocurrencies. This creates a bigger environmental issue than plastic in the long run. Gen Z users care deeply about the environment, which leads them to abandon the product or at least to have strong reservations about it.
What Will Retailers Do?
Retailers and developers have taken note of the Gen Zers and their approach to digital wallets. They will have to adapt and change to it, as retailers must, in order to attract new users and customers. It is likely that they will initiate the hybrid approach.
This means they will provide their services for both those who use physical cards and those who pay with digital wallets. The costs of setting up and running both systems will likely be passed on to users and customers, at least in the long run.
The Future
Digital wallet technology is relatively new, and it's challenging to predict how it will evolve and change in the future; however, it's likely to do so rapidly. The future of digital payments will likely have nothing to do with cards or phones.
Some of the innovative approaches to payments include wearables (such as bands or watches) and voice-activated payment systems. These are already in use, and they'll continue to improve in the years to come. At the same time, no one knows what new systems may emerge as technology improves.
To Sum Up
As many as 66 percent of Gen Z users say that they prefer physical cards to digital wallets as a payment method. This occurs with both cryptocurrency and fiat money payments. Young users believe that digital wallets aren't safe and that they have a negative impact on the environment.
Some digital wallets have introduced physical cards as a way to connect with Gen Z. In the coming years, the entire field may undergo significant changes with the introduction of novel payment methods. Retailers will also adapt and offer multiple payment options, allowing them to tailor their offerings.
