The Psychology of Payment Solutions

As a merchant, you probably think of payment as the most important step for you but one of the least important features of the customer experience. You might devote high portions of your budget to increasing your business’s visibility, to building attractive product packaging or displays, to marketing efforts on social media, to attentive and effective customer service and to an array of other similar endeavors — but when a customer finally decides to pay, that’s it, right?

Wrong. Payment is one of the stickiest steps for customers, who want to be reassured of their correct decision vehemently before they pull out their wallets. That’s why you should be paying close attention to customer behavior during the payment stage and why you should research customer psychology to ensure you are doing your best to encourage swift and confident purchases.

Variations in Payment Options

Before we delve into the psychology, it is important that you understand your options. Long gone are the days when every store had a clunky cash register for cash-only transactions; these days, you need a few different ways to accept payment in order to appease the diverse groups of consumers who will patronize your establishment. If you aren’t familiar with the menagerie of payment options available to you, consider this list:

  • Cash. The king, of course.
  • Checks. Slow, risky and falling out of favor.
  • Credit and debit cards. Rapidly becoming the number one preferred way to pay.
  • Digital payments. Stored on mobile devices and transmitted to POS machines.
  • Payment networks. A number of companies facilitate the secure exchange of money; consider Dwolla, PayPal, Venmo and Cash App among others.
  • Automated clearing house (ACH). Automatic payments electronically collected, ideal for subscription accounts.
  • Cryptocurrency. Some predict that cryptocurrency will soon replace national currencies, even in commercial transactions.

It is important to note that not all consumer groups are in the habit of using all these payment options; indeed, some consumers aren’t even aware of many newer varieties in payment. While it is fair to assume that all businesses need credit card processing, perhaps only a small niche of Web-based businesses should integrate cryptocurrency payments, and perhaps only businesses with older clientele should develop methods for collecting checks. It is important that you perform market research to understand how your target audience prefers to pay — and it is important that you understand how customers respond psychologically to different payment methods, so you can gain greater control over the payment experience.

How Customers Respond

Typically, customers will respond one of two ways after making a purchase. They will either be happy about the purchase (which can occur in varying degrees of intensity) or they will experience remorse. It is your job, as the merchant, to ensure the latter does not occur.

To do that, you should understand why and how consumers develop negative feelings with regards to a purchase. Most often, buyer’s remorse bubbles up when customers impulsively purchase something they desire without considering the consequences of their actions. For instance, if a customer has an online shopping spree, they are tantalized by new items to add to their wardrobe and thrilled to purchase at first — but after paying with a credit card, they might consider the oncoming debt and feel bad. One solution might be to perpetually offer discounts for large orders to reduce that fallout of feeling.

Alternatively, you might try to focus on what brings your audience joy when making a purchase. Research has shown that people tend to feel positively about purchases for the longest amount of time when they pertain to experiences rather than items. Though you shouldn’t abandon your current business model, you might want to change your marketing strategy to encourage customers to think about your products as experiences. To return to the shopping example, you might thank customers for purchases with images of their chosen clothes worn at a party or on a vacation.

You might also note that debt-producing forms of payment, like credit cards, encourage a delay in consequences that results in feelings of remorse. However, given the popularity of paying with plastic, it seems less than prudent to refuse all credit and debit sales for the sake of consumer psychology. Instead, you should adopt alternative payment options, like mobile and digital payments, and hope that consumers can control their credit spending.

How consumers feel matters to your business. By understanding your audience’s reactions to certain experiences and manipulating their environment when they are about to pay, you can increase your sales, build your business and find success.