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26/02/2010 -
Electronic payment processing options are growing in popularity, threatening to make cash and cheque payments soon extinct. But while many credit card companies or banks will say that the popularity of credit and debit cards can be found in rewards programs or other incentives, their popularity may simply be a result of psychology.Every purchase a consumer makes is painful. However, not every dollar spent induces the same amount of pain, said a report from the McKinsey Quarterly on behavioral economics.
The report shows the appeal of credit and debit cards in that they allow customers to keep their money for longer. "One reason delayed payments work is perfectly logical: the time value of money makes future payments less costly than immediate ones."
But delayed payments also have a less rational appeal - they can delay the pain of parting with money.
"Payments, like all losses, are viscerally unpleasant. But emotions experienced in the present - now - are especially important. Even small delays in payment can soften the immediate sting of parting with your money and remove an important barrier to purchase."
Consequently, reason stands to argue that offering debit and credit card processing can actually improve a store's sales, simply through psychological principles alone.
