We have all heard this before:
Customers tend to pay more in purchases when shopping with a credit card as opposed to when they make purchases through hard cash.
In fact, there have been multiple behavioural economic studies conducted in past, that support the above-mentioned assertion.
If you doubt it, just look at your annual sales and inventory report.
Did you spot the pattern?
The question emerges: Why does this happen?
It’s all got to do with the pain of paying
Pain of paying—what’s that? And does it even exist, or is it just a hypothesis—at best, a theory—with no practical grounds of supporting its existence?
What is the Pain of Paying?
Pain of paying is best described as your customer’s reluctance to part with their money when making a purchase. It exists more of as a result of what your customers decide when shopping for an item, manifesting into their spending habits.
The greater the pain of paying, the less likely your customer will shell out money to make the purchase.
So, the “pain of paying” is nothing but an abstract idea and more of a translated sentiment?
Yes and no.
Yes, because your customers don’t actually feel the pain in real. You won’t hear them saying: “My body is aching as I buy this grocery item” — do you?
No, because research proves its existence. To elaborate, Professor Brain Knutson and his colleagues conducted a study, in which they monitored the brain activity of participants as they showed them different products, marked across different price ranges.
This brain activity was studied through fMRI. Products that were marked in upper end of the price spectrum, generated high brain activity in the region of brain, called insula (the part of brain associated with the signalling of pain sensation).
Then, why is it not felt?
Because, the sensation of pain has more to do with just signal processing. It also needs to be relayed to the receptor region (your skin, your limbs etc.). That is why, even though spending generates pain, the signal only gets processed and not communicated in its traditional feeling of sensation.
How Paying with Credit Cards Numbs the Pain of Paying?
Every time your customers make purchases by swiping EMV chip credit cards—or any other credit card for that matter—the gap between the time a purchase was made and the payment made for that purchase is created.
The customer knows in his conscious that he is not paying for it at that very moment. He is not parting off with any cash or coin, that otherwise, he can touch and feel when making a purchase with cash.
Now, when the moment comes, to finally pay his credit card bill—since the bill presents an accumulation of all the items bought over the billing period—your customer cannot associate the expenses with each item previously purchased. Furthermore, because of that “existing time gap”, so many other things happen during the course that the feeling eventually gets subdued.
And that is why customers tend to pay more in purchases when shopping with a credit card.
Looking for Solutions to Integrate Cashless Payment Gateways Within Your Business Model?
We can help you. At UIC, we excel at providing technology abreast POS solutions that can seamlessly integrate with your business model and provide payment convenience to your customers, while helping increase your sales.
From desktop EMV payment terminals to mobile NFC payment modules, we have the payment processing systems to cater to individual business needs.