Millennials and Gen Z Less Interested in Credit Cards, Why?

Jokowi Wants Government Credit Card Independent from Visa and Mastercard (photo: - Unsplash)

The younger generations, specifically the millennials and Gen Z, are becoming less interested in using credit cards as their preferred payment method. Instead, they are opting for other payment schemes, such as buy now pay later (BNPL).

This news is according to Head of Digital Bank UOB Indonesia TMRW Fajar Septandri Maharjaya. He explained that millennials and Gen Z tend to favor BNPL due to two main factors, one of which is their reluctance to accumulate debt.

“Regarding credit cards, we have held several focus group discussions with millennials, and one of their reasons is that they do not want to be trapped in debt,” he said in Jakarta on Tuesday (28/3/2023).

In addition, the underlying process of credit cards is seen as too conventional and complicated compared to the process of making transactions through pay later systems.

“Besides being interested in unsecured loans (KTA), when we discussed with them, we found that they still use loans but more towards BNPL, so that’s what they use,” he added.

Referring to the material shared by Fajar, the penetration of credit cards among millennials is relatively small, with 85% of millennials saying they are not connected to credit cards.

However, some banks are currently trying to cultivate credit card businesses, including UOB, which is in the process of acquiring Citigroup’s consumer banking, particularly the credit card portfolio.

“Now the progress is still ongoing for integration in terms of systems, customers, and the products we will launch. So, yes, we are preparing,” he explained.

Despite this, the General Manager of the Indonesian Credit Card Association (AKKI), Steve Marta, explained that there is a segmentation difference between credit card and pay later users.

Therefore, even though the development of pay later is progressing rapidly, it is not considered a threat to the existence of credit card businesses.

“For now, perhaps the development of pay later is not the cause of the decline in credit card transactions, but the development of pay later will still be our concern,” he concluded.

In conclusion, the younger generations’ declining interest in using credit cards and their preference for alternative payment methods such as BNPL indicate a shift in consumer behavior.

Banks and financial institutions will need to adapt to these changes to remain relevant and meet the needs of their customers.