During the pandemic, demand for credit cards boomed; total card originations increased from 8.6M to 19.3M between Q2 2020 and Q2 2021, representing a 55% jump. And even more interestingly, it was Gen Z leading the way for this huge spike, accounting for 14.2% of this jump. These figures suggest that Gen Z is coming of age in the financial sense – and we aught to pay attention.

But let’s dig deeper: not all credit cards are the same. What drives demand for a credit card for Gen Z? And how can all the payments tools surrounding a credit card improve the overall experience for this audience? For 60% of this generation, using a card for online purchases is a regular activity. In a crowded online space where Buy Now, Pay Later has seen a huge upswing as well, we have to deduce that Gen Z (and Millennials to a certain degree) are interested in embedded finance options.

Let’s not forget that this young generation still faces hand-me-down issues from their predecessors; a lack of credit history provides barriers to certain market activities and a lack of financial literacy discourages them from taking full advantage of certain products. If we flip the script on these 2 issues, we find conditions for innovation in the payments and credit space to serve this generation of digital natives – who are just at the beginning of financial independence and will be around for decades to come.

To meet the needs of Gen Z we identified a few key principles that card issuers can keep in mind:

1. Use non-traditional underwriting to help Generation Z customers secure credit. This involves calling on a range of API-enabled data sources outside of mainstream credit scoring platforms to paint a more robust picture of a young person’s income situation and their ability to repay.
2. Adopt a digital-first mentality, enabling users to complete the entire credit journey within an app that seamlessly connects to popular digital wallets like Apple Pay, Google Pay, and Samsung Pay.
3. Integrate their financial tools frictionlessly so they can easily complete transactions and keep track of their money. Embedded finance tools can provide a user-friendly experience and make these customers more sticky. Contact us if Liberis might be a good tool for you in this principle.
4. Use API-enabled data to design hyper-personalized incentives and discounts that make your product more relevant to your audience members at individual level.
5. Use data analytics to help Gen Z customers understand their spending patterns and improve financial literacy.

A key characteristic of this generation is their digital fluency; they are hyperconnected and glued to technology, so they naturally expect products and services to follow suit in a modern fashion. This is where open API platforms can come in handy.

In addition to building, testing, launching, and iterating card products at speed, open API platforms empower innovators in the credit card issuance space to do a number of interesting things that ultimately result in a better customer experience. Firstly, they make it possible to customize cards with rewards, budgeting tools, and spending analysis in a way that drives customer engagement. Secondly, open API platforms enable instant customer onboarding and virtual card issuing that means users don’t have to wait for a plastic version to arrive in the mail before they can start spending. And thirdly, they provide the tools to update account parameters such as credit limits and APRs in real time.

On top of all the above, owners of open API-enabled card programs benefit from a 360 view of their customer portfolios, which can offer rich data analytics to inform new products and services as markets evolve.

While serving Gen Z may seem daunting, the payoff can be enormous – so it’s best to lay the digital groundwork early to acquire and keep these customers.