Developments in digital technology have greatly increased the number of payment options that merchants are able to offer to their customers.
The last two years have seen a particular increase in online purchasing with E-commerce presenting many opportunities as both businesses and consumers sought ways around Covid restrictions on physical contact and movement.
As buyers have become more willing to use their mobile phones and internet sites to make purchases, it is likely that paying digitally will remain a viable option for many who only started using it recently.
For merchants and e-commerce sites, it is important to understand how digital payment options will affect their customers’ buying behavior in order to better equip their business. Payments processing systems can be a costly investment both in acquiring the technology and also in promoting its use among both staff and customers.
Here, we look at three studies that have aimed to shed some light on how payments options affect customer buying decisions.
In a study published by the Journal of Experimental Psychology, it was demonstrated that customers who are not using cash are more likely to spend more. This may be because the ‘pain’ of making the purchase is somewhat removed from the buyer when they are using a cashless option. However, cashless options must also remain transparent in terms of providing reliable records for the purchaser.
As far as online payments are concerned, a 2020 study by the Journal of Asian Finance, Economics and Business found that in deciding what payment method to use, customers making online payments are affected by the following factors: awareness of usefulness has the strongest positive impact on the customers while awareness of risk has the strongest negative impact.
This means that when consumers are aware of the benefit of using a particular payment method, for instance faster service or improved work efficiency, then they are more likely to use it. On the reverse side, when consumers are more aware of the possibility of a payment method failing, for instance through faulty online payments then they are less likely to use a particular method.
The journal of Retailing and Consumer Services released a report in 2019 detailing the findings of a study that was done to investigate buying behaviour amongst low income earners. It was found that although the total spending for low income earners may not vary greatly with cashless options, they are less likely to react adversely to price increases when using cashless options that when they are using cash to pay.
All in all, the available digital payments options clearly have an effect on consumer spending with some options encouraging consumers to spend more due to their convenience and the consumers perception of their reliability and safety.