Reducing the pain of payment

There’s been some press lately on the move by Visa and Mastercard to eradicate signatures, meaning consumers could only use their PIN to authorise a payment. The Reserve Bank of Australia seems persuaded by the argument that this will help to reduce card fraud, but I thought it would be interesting to turn attention to what it may do to the behaviour of consumers.

Money hurts

Parting with hard-earned money is a psychologically painful experience for consumers. No matter how much they may want what they’re buying, it still hurts. 

Over the years and in order to make consumption more convenient, credit card and point of sale companies like Eftpos and Paypal have introduced technology to simplify transactions. Gone are the days of running a manual imprinting machine over the card, filling out details and dealing with triplicate copies. Now consumers can wave their cards at a Point of Sale (POS) machine without even pausing to key a PIN.

And for business, this is a good thing.  Not only has the paperwork been reduced, but so too the pain of parting with money. 

Separating the pain of paying from consumption

The transition from cash to signed card to PIN card to chip card to ‘wave’ card to…who knows, micro chipping*, is separating the act of consumption from the pain of paying. In behavioural terms we are dealing with “salience”; how much the act of paying stands out in the mind of your customer.  

You see, the less it feels like you are paying for something, the less painful it will seem. Casinos know this all too well, which is why they have customers gamble with chips rather than real cash.

Aside from the method of payment, other methods used in market to reduce pain include:

Removing the dollar sign from menus 

Dollar signs have been shown to trigger associations with money and reduce propensity to spend.

Subscription plans 

While it can be tricky to get customers to pay upfront, once they do they are more prone to forget the cost of the service  

Delayed invoicing

Ever noticed that Apple let you buy from iTunes but don’t send you the ‘painful’ receipt until a few days later? Not only does this separate the consumption from the payment, but they also cleverly aggregate separate purchases so their customers only get hit with pain once rather than multiple times. Oh yes, and it is also means less paperwork for the customer too.

For your business

The experience your customer has with you includes how and when you ask them to pay. It should be your objective to make this pain and hassle free. Not only seek to eliminate unnecessary steps and paperwork in the process, consider how best to schedule and communicate any request for payment.

*Micro-chipping has already happened. A bar in Spain allowed patrons to be micro-chipped to pay for their drinks without needing cash or cards. I understand this bar may now be out of business.