5 Forms of Payment

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    By Paul Baccaro

    Paul Baccaro Coolfront VP, Operations & Product Development

    Paying hurts. With certain forms of payments, it hurts even more.

    It turns out that the physical act of handing over cash causes us the most pain. The reason? It's a highly visible and observable transaction. We physically see our hard earned money going out the door (Ouch!).
    On the other end of the spectrum are the new mobile payments using digital wallet services, like Apple Pay. You wave your phone in the air and type in a PIN. Nothing exchanges hands. It's a fairly transparent transaction. Almost painless (almost).

    Most merchants are not taking digital wallet payments yet, but the good news is credit cards are almost as transparent. People seem to pay more, with less pain when using plastic. I guess what we don’t see, doesn’t hurt us.

    What about checks? Since we have to write out the amount, sign the check and hand over the paper (almost like cash), it’s more tangible and observable than a credit card. That means more painful than plastic, but less painful than cash.

    Think billing your customer is best? Isnt that the least painful since they aren't having to hand over any form of payment? Actually, all you are doing is delaying the pain. Typically when you send a bill, the customer then writes a check (yuck), and has to use a stamp & envelope (double-yuck). That's a highly visible transaction. Painless the day of the service, painful the day the bill arrives.

    Here are the forms of payment ranked least painful to most for your customer:

    1. Digital Wallets
    2. Credit Cards
    3. Checks
    4. Billing/Invoicing
    5. Cash

    The form of payment also impacts how much a person buys. Studies show we buy more when using credit cards. So if you’re looking to offer accessories on a service call like a UV light, smart thermostat, etc., your customer is more likely to say yes if they are paying with plastic.

    So my advice, start assuming plastic as the form of payment. Make taking credit cards easy for your customers and staff. If you like the bleeding edge, look into digital wallets. They’ll be mainstream in a few years so why not get a jump on your competition?

    If you have the time, here’s an interesting study on the effects of transparency of payment.

     

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