Have you considered how the payment options you offer – or don’t offer – may be affecting your sales and your relationship with customers?
If you’re a business owner or merchant, you probably know your ideal customer. Perhaps your preferred customer skews male or female, is young or old, or part of a particular demographic that can be defined by household income, level of education, employment status or other indicator. If you’re like most businesses, “knowing” your customer probably guides many of your decisions, like the products and services you sell, the hours you stay open, the methods you use to market your business, and the places where you choose to advertise.
Payment options can be the difference between making a sale and not making a sale. Consider a simple example: a so-called travel hacker—that is, a consumer who aims to accumulate points or miles as a means of earning travel rewards (free airline tickets, hotel rooms, rental cars, etc.)—might want to pay for everything they buy using a particular credit card. If you don’t accept credit cards—specifically, their credit card of choice—they will undoubtedly take their business to a business that will.
Payment options can also incentivize to consumers to support your business at the expense of your competitors. For example, bitcoin enthusiasts are known to go out of their way to support businesses that accept bitcoin, like Overstock.com—in part because they want to see bitcoin and other cryptocurrencies gain traction in the marketplace.
While these are relatively narrow examples, the important takeaways are:
1. Demographics impact and can predict payment preferences
2. By tailoring payment options to the preferences and needs of your clientele, you can increase revenue and encourage customer loyalty.
“The effect of demographics on payment behavior”
One way to begin to think about how different demographics prefer different payment options is to review the research surrounding consumer behavior. For example, “The Effect of Demographics on Payment Behavior,” by Joanna Stavins, senior economist and policy advisor in the Consumer Payments Research Center at the Federal Reserve Bank of Boston, yields broad-based insights on what one can expect in terms of usage & adoption patterns and payment-instrument preferences, with income, age, education, and race all “significant in explaining payment behavior.”
Meanwhile, gender, employment status, marital status and even geographic area are also significant indicators, with Stavins noting how “women use significantly less cash than men” while using “more checks, debit cards, online banking bill pay, and bank account number pay….” In addition, “women are more likely to hold prepaid cards, which include gift cards.”
At the same time, valuable insights can also be uncovered via survey data, including TSYS’s 2017 U.S. Consumer Payment Study, which reveals, for example, that preferred method of payment can readily be predicted by income, with credit cards the preferred payment option among consumers with an annual income of $75,000 or more.
Similarly, age heavily influences whether a consumer is now ready to open up their digital wallet at a moment’s notice. According to TSYS’s most recent survey, approximately one in ten consumers has loaded a credit or debit card into their mobile wallet, and 68 percent of those individuals “plan to make 50 percent or more of their in-store purchases using their digital wallet within two years,” which augurs well for the continuing rise of mobile wallets.
Along those same lines, age is a good predictor of whether a consumer is familiar with and likely to appreciate cutting-edge payment options. For example, TSYS’s survey reveals that 85 percent of those in the 18-24 age range are familiar with in-app mobile payments, as compared with 39 percent among those 65 or older.
Payments: More than mere transactions
As you might expect, though, even the best research probably isn’t sufficient for you to tailor your strategy as it pertains to marketing and payments. You can take your insights to the next level by talking to—or surveying—your customers and learning more about their preferences.
With any luck you’ll find that your customer demographic is open to, or looking for, the ability to, say, pay in-app, or pay using a mobile point-of-sale (mPOS) device. From there you can use payments to create a competitive advantage and encourage customer loyalty. Those are just a few of the reasons why mPOS is seen by many as the future of payments, especially in retail, as “the ability to take payments from anywhere encourages impulse buying and reduces checkout lines [and also] allows [you] to convert checkout space to selling space.”
But even if your demographic isn’t necessarily interested in emerging payment technologies, payments can still be a part of your value proposition, assuming your customers are afforded the chance to pay the way they want to pay—quickly, conveniently, and securely. That’s why it’s always a good idea to provide multiple payment options. The more fast, secure payment options you are able to offer, the more likely it is you will accept any given customer’s preferred payment method, which is, obviously, a pretty big factor in regards to customer satisfaction. It’s even better if you can provide a uniform payment experience; whether purchasing in-store, online, or via mobile, pretty much everyone appreciates consistency across channels, which has become a point of emphasis for businesses with the resources to pursue an omnichannel strategy.
Last but not least, it’s also worth remembering that most consumers have strong preferences in terms of how they want merchants to communicate with them, whether it’s via email, text, snail mail, phone call, voice mail, mobile alert or social media. Again, TSYS’s most recent Consumer Payment Study may be of help in terms of shedding light on general preferences. For instance, when it comes to communicating special offers and marketing messages, we found that e-mail is the first choice among consumers aged 45-54, while text messages are most appreciated among the 18-24 demographic.