What drives consumers' preferred way to pay?
How much money consumers are spending and what they buying is on the minds of most business owners, but how consumers are paying for goods and services is sometimes overlooked. Between credit, debit, gift, and chip cards, as well as mobile and online services like PayPal, not to mention ever-ubiquitous cash, consumers today are using a wide array of payment options.
As a business owner working to attract more customers, it’s worth becoming familiar with the myriad payment options, and taking the necessary steps to accept whichever form is presented to you. Offer your customers their preferred way to pay, and they are likely to spend more – and return to your business more often. In this article, we’ll review some of today’s payment options and explore why some are more popular than others.
Cash versus cards – what do customers prefer?
If you are a “cash only” business, you may be turning away a lot of potential business. A Bankrate survey found that only two out of five consumers carry less than $20 in cash on a daily bases, and TSYS reports that just nine percent of consumers surveyed prefer cash over credit cards. There are a few reasons consumers may not be as inclined to use cash: 1) the service fees for ATM usage, 2) the risk of theft, and 3) time spent traveling to get cash from an ATM or bank.
When considering different groups of consumers, cash is even less popular among those under the age of 30, with 51 percent of this age group preferring to use cards even for purchases that total less than $5. This group also prefers debit cards over credit cards by three to one– a sentiment reflected by cardholders of all ages, who prefer debit over credit by a 2-to-1 margin.
Another reason many consumers prefer card payments is because of reward programs. These programs are typically associated with credit cards and range from points to cash back and other perks. Credit cards are used 25 percent of the time because of the associated rewards, and 38 percent of Millennials use cards instead of cash specifically because of the rewards program. Consumers also more frequently choose credit cards to pay for big-ticket items, travel expenses, and internet purchases.
How do merchants benefit from accepting card payments?
When their customers forego cash for another payment type, merchants benefit in many ways. First, they make more money. A Dun & Bradstreet study found that consumers spend an impressive 12-18 percent more when using a card instead of cash. Accepting cards also helps streamline business operations, eliminating the need for employees to count cash, calculate change, and take the necessary steps to reconcile sales and deposits.
In addition to credit and debit cards, accepting gift cards can also benefit merchants by helping drive traffic, boost sales, reduce fraud, and build customer loyalty. Vantiv StoreCard goes beyond a simple gift card by offering a private label rewards and payment card with extra features like customer rewards and the ability to pay with a smartphone.
What about mobile payments?
With smartphones always at the ready, mobile payments are emerging as the new popular payments type, especially among Millennials and Gen Xers. Nearly half of Millennials and 41 percent of Gen Xers use mobile payments, who cite the appeal of faster checkout as a primary benefit.
Increased security is also a plus. Fraud protection and data encryption solutions make many mobile payment options even more secure than traditional payment methods. With a strong track record of security, mobile payments are expected to triple in the U.S. in 2016.
Among all the available payment options today, which one will emerge as the most preferred among consumers? The answer remains to be seen– and is likely to continue shifting. From cash to cards to mobile, your best bet is to be prepared to welcome all types of payments from your customers.