Opportunity is Knocking, Tapping and Waving

Cutting-edge payment technologies encourage customers to spend more.  

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Opportunity is Knocking, Tapping and Waving

Oct 8, 2018

Opportunity is Knocking, Tapping and Waving

Cutting-edge payment technologies encourage customers to spend more.

For decades it’s been recognized that customers who pay with credit cards spend more than those who pay with cash or checks in similar situations. A 2001 study on “the effects of payment mechanism on spending behavior” concluded that “payment mechanisms … which deplete wealth with a temporal delay create an illusion of liquidity that result in inflated purchase intention for additional products.”1 That’s a fancy way of saying that when a consumer doesn’t see their wealth depleted immediately, they are likely to spend more money than they might otherwise.

Building on that thought, another study went on to declare that the more vividly a consumer can feel the outflow of money, “the greater the aversion to spending or higher the ‘pain of paying.’”2

Equally notable, perhaps, an article in the Journal of Consumer Research has argued that when consumers pay with payment cards they focus more on benefits than price and costs.3 Speaking to the results of that study, Value Penguin notes that “credit card users [are] 28% better at recalling aspects related to a product’s benefits than cash users. Conversely, cash users [are] 82% better at recalling aspects related to an item’s cost than credit card users.”

All of the above helps explain why two of the top 10 benefits of accepting credit cards relate to their propensity to boost sales and encourage impulse buying. Never mind the fact that the ability to take credit and debit cards is mission-critical if you’re selling products and services online.

A New Era in Payments, Consumer Spending

But today we are entering into a new era in which cutting-edge methods of taking payments are emerging and gaining acceptance more quickly than ever before.

If you’re a business owner, this might seem like a good news-bad news situation.

On one hand, all the new technology and emerging payment options can make it a challenge to keep up with the pace of change. Moreover, keeping up with select changes is essentially mandatory. For example, by now your business should have long-since become EMV®-compliant. And if you’re not yet able to accept EMV chip cards (which are “dipped” instead of swiped), you could be held financially responsible for fraudulent transactions.

On the other hand, though, tremendous opportunities are unfolding for forward-thinking merchants, as research suggests that new technologies are encouraging consumers to buy more—and more often—than ever before.

Payments as “Digital Experience”

Payment technologies are playing an integral role in creating these exciting new opportunities. In fact, Forbes recently noted how payments are no longer considered a “cost of doing business.” Today, “there is a deeper understanding that payment infrastructure serves as a critical digital experience factor that directly influences customers’ likelihood of converting and returning.” And as a result, more and more businesses are focusing on the power of payments to help enhance the customer experience.

This can be as simple as allowing customers to pay with digital wallets, which are enabled by Near Field Communication (NFC) technology and allow customers to complete a payment transaction with just a tap or wave of their phone. For example, kiosks in many Subway® restaurants now allow guests to pay via Apple Pay® or Samsung Pay®.

Meanwhile, other payment technologies are decidedly futuristic. For its part, international burger chain CaliBurger has already tested an artificial intelligence powered facial recognition system that identifies customers at self-ordering kiosks, and the company says it plans to offer face-activated payments later this year.4

Most importantly, though, early indicators are that these types of initiatives are having a dramatic impact on sales. For example, pymnts.com reports that self-service kiosks have boosted consumer spending by 30 percent in quick service restaurants.

The Next Era in Payments, Consumer Spending

Self-service kiosks are just the beginning. Almost any business can find a use for mobile point-of-sale devices (mPOS)—that is, smartphones, tablets and other wireless devices that are equipped to take payments.

In a recent post titled Is the Future of Payments mPOS?, TSYS highlighted some of the advantages of utilizing mobile point-of-sale devices, noting that “the ability to take payments from anywhere in your store encourages impulse buying and reduces checkout lines. It also allows you to convert checkout space to selling space, by converting cashiers to salespeople who can make a sale from anywhere….”

At the same time, the rise of “open” APIs—publicly available programming interfaces that provide programmers access to a proprietary software application or Web service—provides the opportunity to develop new partnerships and revenue streams while better monetizing existing assets.

Meanwhile, well-established technology companies are experimenting with other ways to boost consumer spending. For example, “Uber has added a stored-value account feature to its mobile app-based platform,” and the funds “can be used to pay for services across the Uber ecosystem, such as ride-sharing, food delivery and bike sharing.”5

Not surprisingly, developments like the ones highlighted above have led more than a few observers to speculate that the way technology is enabling everyone to make “fast and frequent purchases may affect a consumer’s ability to save and maintain a predictable monthly budget”6 —and ultimately be harmful to the long-term financial health of many consumers.

But from a business perspective, opportunity is knocking.

If you would like to learn more about how new payment technologies can benefit you and your business—or if you have questions about how to make your business EMV compliant—don’t hesitate to call TSYS at 888.845.9457.

EMV is a registered trademark or trademark of EMVCo LLC in the United States and other countries. www.emvco.com. Apple Pay ® is a registered trademark of Apple, Inc. Samsung Pay ® is a registered trademark of Samsung Electronics Co., Ltd.

1 Effects of Payment Mechanism on Spending Behavior: The Illusion of Liquidity, Dilip Soman, https://pdfs.semanticscholar.org/0abf/fdfa8945cf848a91990bd3b4b3023d1aaf44.pdf

2 Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior, Priya Raghubir and Joydeep Srivastava, https://www.apa.org/pubs/journals/releases/xap143213.pdf 

3  Do Payment Mechanisms Change the Way Consumers Perceive Products?, Promothesh Charrerjee, Randall L. Rose,  https://academic.oup.com/jcr/article-abstract/38/6/1129/1792593?redirectedFrom=fulltext

4 The Face of the Future: CaliBurger Debuts Face Ordering, Pymnts.com, https://www.pymnts.com/restaurant-technology/2017/caliburger-john-miller-qsr-face-ordering-kiosks/

5 Uber Cash Launched in Bid to Boost Consumer Spending, EJINsight.com, http://www.ejinsight.com/20180907-uber-cash-launched-in-bid-to-boost-consumer-spending/

6 Technology’s role in American Consumer Financial Health, Money Inc., https://moneyinc.com/technologys-role-in-american-consumer-financial-health/

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