The Psychology of Spending
Taking a payment used to be a simple matter of your customer handing over physical cash or writing a cheque. Today, there also cards and more than 200 alternative payment methods worldwide.
Establishing your customers preferred payment methods is an important consideration in any business, especially those with a large proportion of remote transactions.
Ignoring your customers’ payment preferences can introduce friction into their buying journey and make your competitors a more tempting alternative. So, what makes people lean towards one payment method over another?
Convenience and familiarity are driving factors
It probably comes as no surprise that people often choose payment methods they find most convenient, whether because they are widely accepted, easy to use, or integrate well with their lifestyle or preferred technology.
Recent research to see which payment methods are preferred when shopping online revealed 68% of respondents liked using Apple Pay or Google Pay as their preferred payment method, compared with 29% for Debit & Credit Card, and 3% for Open Banking, suggesting the majority of consumers value frictionless experiences when it comes to payment methods.
However, separate studies underscore the importance of trust and familiarity; many prefer to use payment methods they are familiar with or those offered by reputable companies. This may explain why debit cards remain a popular payment method, with payments made using credit cards increasing by 19% from 3.4 billion in 2021 to 4.1 billion in 2022.
Cultural norms and regional preferences can also influence payment method choices. For example, certain countries may have a strong preference for cash payments, while others may rely heavily on localised digital payment methods. This only serves to highlight the importance of understanding your customer base so you can provide the best and most tailored payment experience.
Security matters
Although we live in an age where speed and convenience are expected, the need for peace of mind when paying remains paramount. Consumer experiences with retail payment solutions and fraud prevention highly impact payment method choices, and security is a significant concern for many consumers.
Research has shown that 83% of consumers are concerned about how their card details are being processed and stored during transactions by e-commerce businesses, while 48% have abandoned a cart because the website did not seem secure.
It’s clear that payment and security go hand-in-hand for consumers, and that while they prefer multiple payment options, they also need to be assured that payments are secure.
It’s hard to resist an incentive
Once you have identified your target market’s preferred payment options, and ensured security measures are in place, an additional step is to consider the rewards, cashback, or loyalty points available that can incentivise customers to use them. Consumers may choose methods that provide the most significant rewards or incentives based on their spending habits and preferences.
One recent study provides a great example of this in action: more than half of consumers who took part say they don’t use account-to-account (A2A) payments options because they don’t know about them or because don’t know how to use them, yet four out of 10 would be willing to switch if payment platforms introduced incentives such as discounts or rewards. This willingness went up to more than 60% among millennials and Generation Z consumers.
Payment methods play a significant role in influencing consumer behaviour, affecting purchasing decisions, spending habits, and overall shopping experiences. It’s important to recognise that no single option enjoys complete market dominance or comes close to universal customer preference.
To provide ultimate flexibility and ensure your customers have the best payment experience, it’s essential to offer a variety of payment methods. But if you know what methods your customers lean towards, you can maintain that flexibility while maximising operational efficiency.
To find out how you can leverage these insights to better cater to the preferences of your target customers, get in touch with our team of experts today.