Why Gen Z Hates Your Loan Payment Options — and 6 Ways to Fix Them
Generation Z manages money differently from other generations and often makes its money differently. Paying closer attention could improve loan volume as well as loan performance.
By Anne Hay, PayNearMe
For retail banks and credit unions, accepting loan payments has often been viewed simply as a necessary operational expense — a cost center. Yet to the consumer making loan payments it becomes a critical part of the customer experience, and an agreeable process can increase brand loyalty.
Gen Z borrowers have markedly different loan payment expectations than previous generations, with specific preferences for how they want to manage and complete payments, according to our research.
Gen Z expects payment experiences that reflect how they actually manage their money — and Gen Zers won’t stick around while banks treat payments as just another cost center.
Shifting from viewing loan payments as an operational expense to leveraging them as driver of improved customer experience is especially crucial now, as Gen Z establishes their first major lending relationships.
Here are six ways forward-thinking banks and credit unions are adapting to meet the needs of this generation:
1. Design an Effortless Payments Process
Traditional loan payment portals come with too much payment friction: 31% of Gen Z borrowers find these websites and apps difficult to navigate — more than any other generation in our study. In addition, 36% struggle with remembering passwords and account numbers.
Banks and credit unions are addressing these challenges by implementing personalized payment links and pre-populated payment details. Personalized payment links take borrowers directly to their payment flow without requiring account numbers and passwords. When combined with pre-populated payment details, the payment experience matches other effortless payment experiences Gen Z borrowers encounter in their daily lives. This strategy can increase on-time payments.
2. Enable Digital-First Payment Options
Gen Z manages money differently than previous generations, yet most banks and credit unions still offer traditional loan payment methods that don’t match these preferences. Digital wallets and payment apps aren’t just conveniences for this generation. They are essential tools.
More than half of Gen Z borrowers (52%) consider PayPal essential for loan payments, 48% view Apple Pay as important, and 37% prioritize Venmo.
The shift toward digital payment preferences runs even deeper for Gen Z. Nearly two-thirds (61%) say they would likely use digital wallets for loan payments and almost half (47%) want to use the balances stored in these wallets to repay their loans. The latter synchs with data that indicates that many Gen Zers are full-time freelancers and gig workers who have a least a portion of their income not going directly into their checking accounts.
Forward-thinking financial institutions are responding by enabling these preferred payment methods. They recognize that meeting borrowers where they already manage their money drives both on-time payments and long-term satisfaction.
Read more: Trillion-Dollar Transitions: The Two Key Demographics Driving Economic Change
3. Leverage Personalized Payment Reminders to Engage Borrowers
A significant portion of Gen Z borrowers (48%) struggles to remember their due dates. This challenge creates an opportunity for banks and credit unions to transform simple payment reminders into powerful engagement tools.
By embedding personalized payment links within their reminders, progressive institutions are creating a tap-and-pay experience that makes loan payments as effortless as possible.
This approach resonates with Gen Z: 51% say this type of reminder would help them pay on time. Each notification serves a dual purpose — it provides an immediate path to payment while building strong customer relationships and reducing delinquencies.
Read more: 5 Key Demographic Trends for Bank Marketers to Watch in 2025
4. Support Payment Flexibility with Multiple Choices
Too often banks and credit unions impose rigid payment structures that assume borrowers need only one payment method throughout a loan’s term. This approach ignores how Gen Z actively moves money between accounts and payment apps.
Research reveals that 37% of these borrowers want the flexibility to use different payment types each billing cycle. Banks and credit unions are adapting by enabling borrowers to switch between payment methods monthly, driving higher acceptance rates and improved customer satisfaction.
The point is to remove barriers to payment completion and adapting to how this generation of borrowers manages money.
5. Deliver Personalized Experiences with the Gen Z Cohort
Generic payment processes that treat all borrowers the same are increasingly ineffective.
Gen Z expects more, with 59% valuing personalized payment experiences and 58% wanting tailored recommendations after payments.
If data is the "new oil," it can reduce friction in the loan payment process.
Innovative financial institutions analyze payment data to suggest optimal payment dates based on individual cash flow patterns, provide customized financial insights, and offer relevant product recommendations.
Such personalization transforms each payment interaction into an opportunity for deeper engagement with every borrower.
Read more: Contrary to Popular Belief, Gen Z is Suffocating in Today’s High-Cost World
6. Rethink Risk Management By Gleaning — and Acting on — Repayment Data
Traditional loan servicing focuses primarily on managing risk during the underwriting process. As a result, banks and credit unions are likely missing valuable insights derived from their payments data that identify borrowers at risk of missed or late payments.
By leveraging AI to analyze millions of payment data points in real-time, banks and credit unions can transform standard loan servicing into a proactive risk management system.
This technology helps identify subtle changes in payment patterns that might signal a borrower needs support, enabling automated payment plans and personalized engagement strategies before delinquency begins.
The result is a proactive approach that protects both borrowers and financial institutions by addressing potential payment issues early, when there are more options to help customers succeed.
Losing a Generation — Or Building Market Share Through Better Design
Time to gain ground here is limited. Your payment experience design will determine whether you capture or lose relationships with an entire generation of borrowers.
By transforming payment operations from a back-office function into a strategic asset, you’ll build lasting relationships with a generation that will drive portfolio growth for decades to come.
