For the so-called Generation Z, the smartphone is an everyday object with which they also make purchases and payments.
(Photo: IMAGO / Shotshop)
Berlin Almost half of young adults have failed to pay a bill. Almost a quarter have already been contacted by a collection agency.
These are the results of a representative survey initiated by debt collection company Pair Finance and Fresenius University in Hamburg and available exclusively to Handelsblatt. The respondents belong to the so-called Generation Z, i.e. were born in 1993 or later.
These young adults are considered digitally savvy. Unlike older generations, the smartphone is an everyday object for them, which they also use to make purchases and payments.
“Generation Z has an overall more positive attitude towards debt and speaks more openly about debt collection experiences than previous generations,” says Minou Goetze, professor of decision psychology at Fresenius University. However, dealing with debt in a relaxed manner carries risks.
“Early onset of debt can lead to long-term financial problems and a higher risk of debt over the course of a lifetime,” warns Goetze. “On the other hand, dealing openly with debt can also mean that those affected get help more quickly if they have problems.”
Late payment deadlines in online retail
At the very least, new digital payment options increase the temptation to make purchases that stretch the budget. Service providers such as Klarna or Paypal, but also online shops themselves offer the payment option “Buy now pay later” (buy today, pay later).
Digital shopping is made easier with the information that shoes, clothes and mobile phones do not have to be paid for immediately. Later payment periods can be agreed, alternatively installment loans are offered.
The financial regulator Bafin warns against the supposedly easy way to “buy on pump”. After all, credit-based payment methods are a means of promoting goods.
In principle, consumer protection regulations also apply to these payments. However, there are exceptions. Because when it comes to amounts under 200 euros, there is no mandatory credit check. The consumer must therefore decide for himself whether he can afford the purchase. In this case, there is no protection against excessive interest charges.
Consumer advocates also warn. If the account is not covered, its owner would have to take out a relatively expensive overdraft facility. If the payment cannot be made, the consumer will receive one to three reminders until a collection agency is called in. This further increases the costs. This paves the way for the debt trap.
Meanwhile, the head of Pair Finance, Stricker, warns against misperceiving digital payment methods. “The payment specialists have managed to simplify a payment process that many consumers find annoying.” That is progress. In essence, the classic purchase on account has been digitized by “buy now, pay later”.
School should teach how to handle money
Stricker recommends learning how to handle money at an early age. It is a socio-political task to provide consumers with the necessary financial knowledge. You should start doing this in school.
The survey also offers valuable insights for the debt collection industry itself, which collects outstanding debts on behalf of the economy. When asked how payment reminders should preferably be communicated, 51 percent of those surveyed spoke out in favor of emails, 36 percent for letters and only eight percent for WhatsApp messages.
Debt collection companies should address their defaulting customers individually, recommends Professor Goetze. The individual preferences in the type of communication, the time and the payment solution must be taken into account. This also increases the chance of persuading customers to make a payment.
More: Why more people became shareholders in the pandemic year 2020.