A new report by Afterpay has predicted that Millennial and Gen Z's share of spending will surge to 47 percent by 2030 and their growing influence on the economy will be even more pronounced as they reach peak earning years. And the way they’re spending their money shows an increasing preference for buy now pay later.
In its latest report - which analyses customer spending alongside external retail and household data - Afterpay found that in Australia, BNPL usage has surged by 174 percent with Gen Z and 110 percent with Millennials since Jan 2020.
In contrast, credit card spending has remained static among Millennials and older generations and fell by around 7 percent for Gen Z.
Similarly, the data showed that debit spending trails BNPL, climbing by just 20 percent across all three generations.
In the USA, BNPL spend has grown by a whopping 230 percent, compared to a 43 percent rise for debit and an increase of only 8 percent for credit cards. In the UK, BNPL spend has grown by 315 percent, compared to a 4 percent increase in credit and debit card purchases.
“Gen Z and Millennials are driving change at the intersection of culture and commerce, so it's no surprise they have been key adopters of Afterpay and BNPL more generally," said Mark Teperson, Afterpay's head of strategy.
“This demographic is set to account for nearly half of the globe’s retail spend by 2030. Their influence on the economy will only continue to grow, especially as they reach peak earning years.
“Having built its business by connecting Millennial and Gen Z shoppers to the best brands in the world, Afterpay is in a strong position to help its retailers navigate this demographic by providing unparalleled insights into the hardest to reach customer cohorts”.
The report also found that the tumultuous first half of the year resulted in a drop in spending among younger shoppers.
Millennials and Gen Z are currently spending five percent and seven percent less than pre-Covid levels. This compares to December 2020, where spending was up 10 percent on pre-pandemic levels.
Small business spend
Encouragingly, growth in small business spend remains solid - up 20 percent year-on-year for Millennials and 45 percent for Gen Z.
Roughly two-thirds (67 percent) of all Afterpay spend in small businesses is driven by Gen Z and Millennials, proving their desire to support small and local businesses.
The categories in which Aussies are spending has drastically changed in the first six months of 2021, the report said.
In December 2020, like much of the nation, younger Aussies were investing in their homes with household and department store purchases the fastest-growing categories.
As of July 2021, before recent lockdowns hit, Gen Z and Millennials shifted their spending to recreation and experiences. Afterpay reports recreation (games and electronics) was the fastest-growing category amongst all generations – growing 90 percent year-on-year for Gen Z and 51 percent for Millennials.
Similarly, spending on travel and events surged on Afterpay, as state borders opened and live entertainment returned, before swiftly closing again.