If there’s a Generation Zer on your holiday gift list this year, it might be best to ditch one of the essential gifts for young people: a wallet.
About 4.4 billion people, or about half of the world’s people, use digital wallets, and that number will grow by 35 percent by 2030, according to technology strategy firm Juniper Research. Adults 24 and younger are most likely to pay with their phones, using them to make 45 percent of purchases, according to a 2025 report by the Federal Reserve (by age group, cell phones were used for 23 percent of payments). Cash now accounts for just 14% of all purchases and is more likely to be used by people over 55 or households earning less than $25,000 a year. A 2024 McKinsey survey found that one in five people in the US and Europe who use digital wallets often go out without bringing a physical one, and in the UK only 38% of 18-24-year-olds own a wallet or purse that they consider essential in their daily lives, according to Link Scheme, a nonprofit working to provide access to cash in the UK. People are ditching cash, with 30 percent of Americans saying they haven’t withdrawn cash from an ATM in the past month and 17 percent saying it’s been more than six months, according to a LendingTree survey.
This change is changing the way they think about the money they spend. For older generations, cash feels real; for the younger ones, it might as well be monopoly money. Hailey Moore, a 26-year-old from Los Angeles, tells me she hasn’t had a wallet in more than a decade and rarely carries cash. If she gets some, perhaps in a birthday card, it feels like fun money: “If I have money, it’s money that doesn’t exist,” she says. And it disappears quickly. “I can just use this for a little treat.”
For younger buyers, cash has lost its edge.
Apple Pay arrived 11 years ago, but people were slow to put their credit cards on their phones; tapping a phone didn’t seem like a better use case to me than swiping a credit card. This largely changed when contactless payments were favored in the pandemic and Apple Pay became easy to use for online shopping. Now, digital payments and cards are becoming more and more important. The pennies, which cost about two pennies each, went out of print in November. Digital IDs are now accepted at more than 250 US airports for domestic flights. More and more daily activities can be done with just a phone. Oura is even looking into ways to make its smart rings work as wallets and keys.
If I have cash on me, it’s money that doesn’t exist. I can just use this for a little treat.
Hailey Moore, 26 years old
And as digital wallets are used more frequently, people “trust the digital wallet more than cash,” says Adam Gray, chief transformation officer at payments technology firm Stax Payments. They are more secure than carrying a physical wallet full of cash and cards. “We’re trying to allow as many merchants and venues as possible to take it because it’s better for everyone.”
Historically, people tend to spend more when paying with credit cards than with cash. But that may be changing in Gen Z – a Cash App survey released last month found that 54 percent of Gen Zers say they’re more likely to spend money thoughtlessly. The money that’s already left your bank account or came into a card from your aunt might feel insignificant compared to the mounting number on a credit card statement you’ll have to deal with at the end of the month. Moore also tells me that she uses her debit card the most, only tapping a credit card for big purchases or ones she knows she’ll earn points for, like at gas stations and grocery stores. She mostly wants to get credit and pays off the card early to avoid overspending what’s in her bank account.
Shoppers have mixed feelings about using cash over cards. A 2023 study from the University of Notre Dame found that people prefer to use cash for purchases they feel guilty about. But cards can also quickly deplete dopamine—MIT researchers have found that using credit cards can activate a reward-pleasure sensor in the brain, causing people to become addicted to spending, or at least to loosen restrictions on spending. (The researchers behind this 2021 study didn’t look at mobile contactless payments, but said the ping that followers a purchase made from a phone could serve as a reminder of the money spent and discourage tapping with abandon.)
Being the first to swipe your card on the check at dinner and maximize rewards has become alluring for travelers, but more young people are quickly adopting buy-now, pay-later companies like Klarna and Affirm. This past festive season, Gen Z used BNPL services more than credit cards, according to research from JD Power. For people using these services, “the payment terms are much more reasonable and transparent than credit card payment terms,” says Sean Gelles, senior director of payments insights at JD Power. Frances Boyle, a 29-year-old from Seattle, says she has used buy-now, pay-later services for clothes. “It’s almost a way to justify the purchase, because I’m like, ‘I can’t spend over $100 right now. But $20 a month, that doesn’t sound so bad.’
Data from PayPal shows that BNPL can get people to spend 91% more at large businesses and 62% more at small businesses. Half of shoppers say they are more likely to complete a purchase when the split payment option is at checkout. But a frictionless way to buy small things online now can turn into an annoying payment that takes months and even turns into a big debt down the road.
It might seem convenient to ditch cash, but a digital wallet can’t cover everything.
Tori Khutorna, a 28-year-old living in Prague, says she no longer owns a wallet — she uses a digital wallet and an app that hosts her ID. It all started during the COVID-19 lockdown with online shopping. “Going forward, we didn’t see any real need to have cash.” But her plan ran into trouble when she traveled. Khutorna also says she had to ask a stranger for cash to buy food and then wire the money to him when she was in Ukraine, and a major power outage knocked out card payment options in one neighborhood. Once, while in Italy, he couldn’t buy a bus ticket because a card machine was broken. She was fined for not having a ticket (the fare enforcer, conveniently, had a device that allowed her to use Apple Pay to pay her fine instantly). “Sometimes, I feel really disconnected from reality” without money, she tells me. When she sees a nice wallet for sale, she sometimes feels drawn to buy it. – Then I think, why?
For young people saying goodbye to their wallets, the world may have to catch up.
Amanda Hoover is a senior correspondent for Business Insider covering the technology industry. She writes about the biggest companies and technology trends.
Read the original article on Business Insider