How the Next Generation Will Use Credit Cards

The year is 2034. Gen Z, now ages 22 to 37, is enjoying its waning years of cultural relevance before brands focus their marketing on Generation Alpha. We still don’t have jetpacks.

But what we will still have are credit cards — only they might not resemble the ones we use now. After all, a decade or two makes a lot of difference when it comes to payment technology. Within the past 15 years or so, we've witnessed the rise of digital wallets. At the same time, physical credit cards evolved from having magnetic stripes to EMV chips to contactless tap-to-pay capabilities. Financial technology companies continue to threaten the dominance traditional banks enjoyed for, in some cases, more than 200 years.

“There’s been a lot of good progress, but there’s still substantially more that can be done,” says Brian Muse-McKenney, chief revenue officer of E6, a financial infrastructure provider.

Here are some ways credit cards are evolving for the next generation.

All paths will begin with your phone

If it’s your habit to check for your phone, wallet and keys before leaving home, that list of essentials is going to get shorter.

According to the J.D. Power 2024 Digital Wallet Satisfaction Study, 48% of U.S. consumers used a digital wallet in the past 90 days. Eventually, digital wallets will render physical credit and debit cards obsolete. (Consider, for example, Visa's "one credential" plan, announced earlier this year.)

And it's not just payment methods. Loyalty program cards, event tickets, transportation passes and even ID cards can be stored on mobile devices now. Some hotels even offer digital room keys, allowing you to unlock doors with your phone.

For now, though, merchant acceptance is one issue that’s slowing adoption — just 57% of small businesses currently accept digital wallets, per J.D. Power.

Despite this, Gen Z is embracing this technology, some members more boldly than others — 10.3% "rarely or never" carry a physical wallet at all when leaving the house. That’s according to Digital Wallets: Beyond Financial Transactions, a June 2024 report from PYMNTS Intelligence, a global data and analytics platform, in collaboration with Google Wallet.

Buy now, pay later will (continue to) thrive

The concept of paying for a purchase in installments isn’t new, but modern buy now, pay later plans continue to grow in popularity. There’s no hard credit check required, and many plans won’t charge interest or fees, or hurt your credit scores, unless you miss a payment.

While 25% of Americans used buy now, pay later in the past 12 months, according to NerdWallet’s 2024 State of Consumer Credit Report, 40% of Gen Z did so during that period. Younger adults are newer to establishing credit, so a payment plan that’s fast, convenient, and not reliant on a long credit history can be appealing.

In addition to third-party buy now, pay later providers, many major credit card issuers offer installment plans for eligible purchases you make with your card. You may be subject to interest or fees, but one benefit is the ability to earn rewards even if you pay off a purchase over time with an installment plan.

Social media will play new and even bigger roles

Gen Z increasingly turns to TikTok and Instagram, not Google, for information about financial products like credit cards. Not every influencer provides accurate answers to money questions, but many do, making social media an educational tool.

It’s also a place of commerce. Influencers partner with brands to market products, and brands can sell to consumers directly from social media platforms. According to Tracking the Digital Payments Takeover: Monetizing Social Media, a 2023 report by PYMNTS and Amazon Web Services, 68% of Gen Z consumers searched for products on social media, and 22% ended up buying something they found this way.

For younger adults and teens, social media won’t be the way to keep up with old friends. It will be a one-stop place to learn, interact with brands, and spend.

Credit cards with 'training wheels' will keep rolling out

Establishing credit is important for any young adult who wants to one day qualify for things like travel rewards credit cards or a car loan with a decent interest rate. New products aim to make credit-building simple. Some credit cards evaluate income and cash flow, in addition to credit scores, to extend credit to people who otherwise lack access. Other cards are connected to a funding account, capping your spending limit to what’s in the account and automatically paying bills on time each month.

While cards tied to a funding account aren’t going to teach you how to manage a more traditional credit card later on, Muse-McKenney says they allow users to build credit without taking on as much financial risk.