More than half of Gen Z says they only use cash as ‘a last resort’ and doing so is ‘cringe,’ survey shows

Consumer payment trends indicate a notable decline in cash usage, with it now ranking third behind credit and debit cards, particularly among Gen Z who increasingly view it as a last resort. Simultaneously, Buy-Now, Pay-Later (BNPL) services are rapidly gaining traction, with 42% of Gen Y and Z utilizing them as an alternative financing method, especially for those with limited credit history. While BNPL facilitates purchases, experts warn of its inherent risks, including consumer overextension and debt accumulation, mirroring concerns associated with traditional credit card usage.

Analysis

The Federal Reserve Financial Service's 2025 Diary of Consumer Payment Choice indicates cash has fallen to the third-most-used payment method, behind credit and debit cards. This trend is significantly driven by Gen Z, with a Cash App/Harris Poll survey revealing over 50% use cash only as a "last resort" and nearly a third view cash users as "out of touch." This demographic shift suggests a structural decline in physical currency transactions, with only 7 out of 48 average monthly payments now being cash.

Concurrently, Buy-Now, Pay-Later (BNPL) services, including those from Klarna, Affirm (AFRM), and PayPal (PYPL), are experiencing substantial growth, particularly among younger generations. A J.D. Power study shows 42% of Gen Y and Z utilize BNPL, more than double the 21% adoption rate among other demographics. These services appeal to consumers with limited credit history by offering installment payments, exemplified by a consumer financing a $4,000 vacation via Afterpay.

Despite the convenience and accessibility, experts highlight inherent risks associated with BNPL, specifically the potential for consumer overextension and debt accumulation. LegalShield provider Rebecca Carter warns of individuals juggling multiple payment schedules, leading to significant financial burdens akin to snowballing credit card debt. This cautious tone (sentiment_label: mixed, tone: cautious) suggests that while digital payment platforms benefit from these trends, the broader economic implications for consumer credit health warrant close monitoring.

Key Decisions for Investors

• Investors should evaluate payment processing companies and digital wallet providers, such as Apple Pay (AAPL), for sustained growth opportunities driven by the ongoing shift away from cash, particularly among younger demographics.
• Consider the growth trajectory of BNPL providers like Affirm (AFRM) and PayPal (PYPL), acknowledging their strong adoption rates among Gen Z/Y while factoring in the increasing regulatory scrutiny and potential for consumer credit risk.
• Monitor consumer debt levels and regulatory developments concerning BNPL services, as increased defaults or stricter regulations could impact the profitability and growth prospects of companies in this sector.