Payment Pulse – Ep. 5

Payment Pulse: The Power of Social Proof: Learn how influencer endorsements, online reviews, and peer behavior shape our buying habits.

Status Spending and Luxury Psychology: Understand why consumers use high-end payment methods to signal prestige and how brands capitalize on the “Keeping up with the Joneses” mentality.

FOMO and Impulse Purchases: Explore the role of limited-time offers and BNPL services in reducing purchase friction and triggering rapid spending.

Digital Trends on Social Media: See how platforms like Instagram, TikTok, and YouTube are revolutionizing product discovery and checkout experiences.

Cultural Influences on Spending: Discover how global payment preferences vary and why adapting to local norms is key for businesses expanding into new markets.

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Episode Transcript

Steve Bell: Welcome to Payment Pulse, a podcast by Clearent by Xplor, where our goal is to humanize and simplify the complex world of payments. My name is Steve, and I’m here with my co host Max. And today we’re going to kind of just start with a quick introduction to who we are.

I don’t think we’ve really done too much of that, maybe a little bit in the intro. But just so that we have context on, like, how we’re structuring these conversations and who’s ultimately the SME (Subject Matter Expert) in each category, if you will. Again, my name is Steve. I am the senior marketing manager here at Clearant.

I primarily focus on the software ISV channel but that’s my core responsibility and, you know, where I come into play today. I’ve worked in payments for the last six and a half, seven years, starting all the way out at a a customer service level, speaking directly with merchants holds that experience holds near and dear to my heart.

And it is very, it was a very critical aspect of my career and, you know, being really at the grassroots of the pain points that some of these merchants are experiencing. And so that’s kind of where my experience comes into play. But Max, how about yourself?

Max: Yeah, I appreciate the intro, Steve. You’re definitely more of a season payments person than I am. My background is more of the economics and finance world. So I came to explore about a year, two years ago now, and I work in our finance FPA managing our U. S. and U. K. markets. so, my background, however, is in policy and economics.

And so prior to being an explorer, I was at Ernst Young for two years working in quantitative economics and basically breaking down a lot of the economic cycles that we’re seeing and understanding how companies big, you know, Fortune 500 companies all the way down to, you know, small municipalities influence our economy.

So, yeah, really excited because I think payments, the reason we, you It started this podcast is because I think we wanted to put our two brains together and kind of say, like, what is happening [00:02:00] across the economy? And what’s happening, you know, in these small, smaller markets? And, and how can can small businesses kind of react to it?

So do it all. So really excited about where we’re going with this and you know, that we’re working on this together.

Steve Bell: Yeah, man. Yeah. It’s two different perspectives, but that’s really the beauty of it. And hopefully we can continue to deliver, you know, value from our own perspectives. With that being said, it’s a perfect segue with your your introduction of yourself there. Our topic today is how macro economics is.

Factor influences, you know, consumer decision making specifically regarding payment technologies. You know, in the last few episodes, we’ve covered how microeconomics help provide a framework for understanding consumer decision making you know, how consumers respond to emotional and social influence while shopping and also how trust and risk.

impact consumer psychology. But today we’re gonna take a look at the bigger picture and how larger economic trends impact the way consumers think about spending and, you know, ultimately their payment [00:03:00] preferences. You know, at Clearant as providers of, you know, payments and software solutions, it’s vital for us to understand not only individual consumer choices, but also broader economic conditions shaping those choices.

You know, whether that’s you know, between cash, credit card, mobile payments. Or, you know, why certain technologies thrive in specific economic climates. We’re really here to break it all down. But with that said, Max, you know, before we dive into the specifics, can you just quickly define what we mean when, you know, we’re talking about macro economics?

Max: Yeah, absolutely. Steve. So, in our episode, we talked about microeconomics focuses on the individual and small group decisions. Well, macroeconomics, macroeconomics expands that definition and looks at the economic conditions of a nation or at a global scale. talking about big picture factors like inflation, interest rates, money supply. Labor markets overall consumer confidence [00:04:00] these forces are the ones that shape the entire economy’s performance and are, are directly over the consumer’s individual decisions day to day. So yeah, so it’s

Steve Bell: Yeah.

Max: it’s taking this kind of aggregated view of microeconomics and expanding it to, you know, the entire nation of the world.

Steve Bell: Yeah, it’s a great summary, Max. Perfect way to start. So, let’s, you know, really jump right in from there. Starting with inflation, you know, we see it everywhere. It’s literally in our faces, on the news, on social media. Can you help explain how rising prices impact consumer payment behavior? So, So, So, So, So, So,

Max: have cut back their spending due to inflation. And many these changes in inflation, their budgets have changed as well. You know, we’ve, we’ve essentially taken you know, essential goods and put that at the top of our list over, you know, kind of discretionary items.

So, [00:05:00] might have noticed that, like, groceries, utilities, oh, you know, your rent, all have increased. It leaves less money for, you know, left over for, you know, another, another hat, another, favorite pair of shoes. All these kind of collector’s items or discretionary items. Essentially what this means is, like, inflation Erodes are purchasing power. You know, as consumers, we become more sensitive to transaction costs and and friction really in the in the consuming process. And it prompts a noticeable shift towards more efficient payment technologies. For instance. Mobile payment solutions have surged in popularity during inflationary periods since they offer reduced friction, rewards programs, budget tracking features help consumers manage spending better than under economic conditions that are inflationary. cards with these strong [00:06:00] rewards programs are another great example. You know, over 83 percent of consumers hold these rewards programs cards with rewards programs and typically they will, you’ll see a surge in the use of these cards during inflationary periods because it offers this kind of hedge against inflation, so that they can earn cash back or points and in their minds, you know, offsetting some of the rising costs.

Steve Bell: Yeah, that’s pretty interesting. Yeah, you know, so kind of what you’re saying is payment technologies are actually helping people navigate inflation strategically. And so that’s, yeah, that’s really interesting, but let’s shift gears from that, you know, to interest rates, another headline grabber, you know, how does this, you know, come into play?

Max: Yeah, yeah. interest rates are sort of you can think about it in the way of, like, it’s the government, it’s you know, the making systems way of controlling inflation it essentially influences how much it costs to borrow money, [00:07:00] and getting too complicated, it impacts how consumers choose to pay for goods and services. in a lower interest rate environment, you know, we see borrowing. Is cheaper. So, you know, it, it borrowing in the sense, let’s just take credit cards, for example, means that you’ll, probably spend more and use your credit card more because, pay the borrowing on credit will be cheaper. however, when it’s a lower, when, when interest rates rise, becomes more expensive. And so consumers will probably reduce their credit card usage and turn more to debit or alternative payments like cash or maybe a buy now. A buy now pay later, or a, you know, a check. So interest rates create this kind of like cyclical pattern of consumer pre payment preferences and, you know, payment providers have to kind of evolve to understand, you know, [00:08:00] if we’re in high, high interest rate environment, then, you know, people are probably going to revert to debit and credit for the low interest rate environment, we’re going to probably see the opposite. And so merchants. card providers, processors, all know that this is like a massive a very like easy thing to track because like we can just go in and see like, hey, is the Fed going to cut rates? They cannot raise rates. So it’s a very like tangible thing we can go out into the economy and see.

Steve Bell: Yeah, no, that makes sense. I appreciate the the explanation there. Let’s jump to this next one. It’s a bit more abstract, but let’s touch on the money supply. You know, how does that influence payments as well? Right?

Max: is the fun part. The interesting part about these, this podcast Steve is like, like we said, we like, we’re going like, really tamed. Like, we talked, we started with microeconomics and we like, had all these analogies about like, things you and I decided on. And like, we came up with, you know, our. Like [00:09:00] utility curve and we were saying like, oh man, like we’re, we’re happy with some type of combination of hats and and watches and like, it’s all really, like, you can kind of, you can kind of understand it like, because it’s like a very like real world type of thing. You can see and feel. is like one of these things with macroeconomics, like, I don’t think anyone can really. or see money supply. Like, it’s just, it’s like, it’s like trying to understand physics. And like, we all, we all saw some of those like physics movies and you’re like, dude, how are people coming up with this? But like, I’ll try to distill this down into like a tangible example. Money supply, let me, let me try to define it and then I’ll try to give you an example of why it’s impactful to purchasing decisions. Money supply is, is generally like this, this concept that influences overall purchasing power. So it, it, it’s essentially like this term that helps to define the strength [00:10:00] of your money. When the money it’s, so when we say like the money supply expands it means that, you know, we’re spending more, you know, if we see that, like, more money in the economy, we, you know, we see printing and money more, more greater printing and money, you know, we have more money to spend.

However, Just as we mentioned a couple seconds ago, more money we have to spend, the higher prices will go, so like, it will see inflation increase, meaning that like, actually, each, like, the next dollar we’re spending to pay, like, the next, dollar we spend loses its purchasing power, so, you know, if we expand the money supply, You know, we see a strong demand for payment technologies that, you know, optimize for you know, security, transparency, and, and really, like optimize for high credit

Steve Bell: The purpose of the show is [00:11:00] to ask a question to the Board of Trustees and to the President of UT. To my knowledge, the Board of Trustees has never had the opportunity to address the Board of Trustees before the changes in our agenda. I asked the Board of Trustees to take an active role in the details.

So I need to tell my board to take an active role and because that would be when I do.

Max: are that our neighbor and all the people that are, you know, in our, in the rest of the economy are also feeling that.

And so it’s, yeah. also, it’s just like this weird dynamic where, you know, essentially we have to like, be mindful that we’re, we’re not creating inflation for ourselves. So it’s like this weird thing. Now, what, what I’ll kind of, let’s take a step back and say like, why are we even talking about money supply if it’s like, not something that like, You can really put your finger on the reason why it’s important for payments that when the money supply expands and consumers like you and I feel [00:12:00] like we have more power, we have more money to spend and we decide to use that in electronic payments. It actually helps the rest of the economy work better. The reason being is that when you and I use just

Steve Bell: Okay. Yeah. Yeah. Yeah. Yeah.

Max: Or in that, in that merchant’s bank a longer period of time than if I go and pay with my apple, my, my tap to pay apple card. and that is like the interesting part of electronic payments and why creates, [00:13:00] it’s stimulating to the economy is that when you pay with electronic payments, it actually has like. It’s like a greater impact on the second, like the second and third order effects it more quickly like reshuffles through the economy and we have more money supply circulating through the economy. this is more of like a call to action of like, hey, be good to your neighbor. If you want to be good to your neighbor, if you want to be good to like your, the rest of like your local economy, you’ll pay with. You’ll pay with mobile payments, you’ll pay with your credit card, you’ll pay with something that is kind of tech enabled chances are that there’s going to be a shorter window of time between when that money is then used for the next transaction, than if you use check and cash,

Steve Bell: Yeah, no, that’s it’s a fantastic way to think about it or an interesting way to think about it, I should say but it makes total sense. With that said, let’s move on to the next one here. We’re looking at labor markets and consumer confidence. How does that relate to payment [00:14:00] technology and overall the adoption of it?

Yeah,

Max: labor market conditions and consumer confidence are really closely linked. When consumers feel secure about employment and incomes, you know, they’re more inclined to adopt, you know, these kind of innovative payment methods. Research, recent consumer confidence data showed a cautious optimism about the labor market recently, you know, despite the lingering Concerns about prices and interest rates. So we should see that like this stable environment encourages consumers to experiment with newer technologies. You know, buy now, pay later. You have to pay, you know, virtual virtual wallets because they’re going to just perceive the risk less than, you know, if they were like tight on cash, tight on, or, or worried about like their income. Hopefully that makes sense.

Steve Bell: no, it does. Yeah. And speaking of perceived risk, that was one thing that stood out, you know, our research from the last episode highlighted [00:15:00] something, you know, called a trust premium. And established payment methods you know, particularly during uncertain economic times. Can you expand on that concept in this case a little more too?

Max: Yeah, absolutely. So when You know, economic and economic uncertainty arises, think recessions or a volatile financial market. I mean, kind of like what we’ve experienced so far in the last couple of months of this year, consumers become like hyper aware of the potential risks. You know, often preferring the established trustworthy payment methods over newer. less tested technologies. Established methods are these, you know, credit cards the widely accepted mobile payment that we know have security and transparency and fraud detection and you know, we can You know, it just creates peace of mind. And so, it’s, it’s being well aware [00:16:00] that, like, if you’re a merchant and you’re considering, know, taking on a new payment method know, it’s also understanding that, like, does that have product market fit within, like, your consumer base, you know, are you going to, like, bring a new piece of technology on and, like, no one’s going to use it because people kind of like worried about where the economy is going and they don’t really want to test their, their, their kind of risk tolerance at this moment. It’s something to consider for sure.

Steve Bell: Yeah, absolutely a consideration. Yeah, very insightful little segment of of that risk piece that we talked about last week. Or an episode ago, I should say. Definitely go check that one out. It’s super important, that risk perception and creating a stronger relationship from a merchant to consumer level, so.

But yeah, let’s pivot here briefly real quick to, you know, how payment providers adapt to technology strategically in response to these macro shifts, you know, can you walk us through some of these examples?

Max: Yeah. So during economic downturns [00:17:00] we’ve seen that, seen that there’s been this kind of slow adjustment by the payments industry enhance budget. You know, basically these as well as enterprise value. plays from a product perspective. So you’ve seen budgeting tools and financial management features added to payment products to directly address the heightened anxiety around consumer you know, we see buy now, features like buy now, pay later gain traction as well. Precisely during these periods because they offer financial flexibility to consumers. And you know, providers also ramp up security and protect the transparency features because they know that consumers want for us, they want to know that they can like, they can understand their finances during, you know, economic volatility, times of economic volatility.

So the last. Kind of piece that is a little bit, we’ll go back to, like, the [00:18:00] things that seem as obvious, but we see, like, an increase in reward program card usage during these times of inflation to offset some of the rising costs of things that we’re purchasing. so we’re seeing a little bit of, like, both the industry adjust. Using new technologies during times of economic uncertainty, we’re also seeing consumers just adjust naturally using what’s already available. And so I think the, the, the real takeaway is that, like, as humans are very adaptable creatures and, like, payment technologies are something that we, like, will adapt to in order to, like, offset risk for ourselves.

Steve Bell: Yeah, those are good examples. Could you give like a real world scenario to just illustrating, you know, maybe some of these strategic adaptions?

Max: Yeah, let’s think of, like, post pandemic. That’s probably the best example. So [00:19:00] mobile payment usage, notably increased post pandemic. And it helps stimulate consumption, economic recovery, all that, you know, I can kind of remember the dates and like, all of a sudden, we were all scanning QR codes to pay for something or we were all like, from a, from a distance, like paying, you know, rather than going and like, tapping our credit card on a terminal. Yeah. And like that is like a great example of like a macro, like a, an impact on the economy, then changing, like how the industry evolved. And so like that rapid adoption highlighted how we adopt, adapt to, to new economic and market conditions. And similarly, like we’re seeing this, this kind of trend a similar type of adaption in like emerging economies where digital finance. It’s really taking off. So, you know, we talk about like, I think

Steve Bell: [00:20:00] Hello,

Max: And so we are now seeing

Steve Bell: everyone.

Max: as techno payment technologies enter these new markets, we are seeing wicked option of payment technologies almost immediately because it’s offering again, like first the consumer, like value to the consumer, right. The, the individual that has that technology available to them, but then it’s adding like the next layer of impact, the merchants and you know, all the way down the ladder of the economy. After that. So look, there’s so many good examples to pull from, but we’re adaptable or adaptable human

Steve Bell: Yeah, I think COVID just kind of a comment on that. And this is more of a hypothesis, but that was obviously such a. dramatic shift, [00:21:00] and there was a lot of technology that came along with that and causing those adaptions. Not only did that accelerate the technology, but it also feels like it accelerated the adaption and the adoption of these new technologies as well in the post pandemic world.

So really interesting stuff there. But let’s wrap it up, Max, you know, what strategic insights, you know, should payment technology providers take away from our conversation today.

Max: Yeah, I mean, look, it’s it’s what we’ve been always saying is it’s to remain agile, right? If you’re an ISV, if you’re a payment processor, if you’re a. A merchant right that you must remain agile that like is just another thing to that macroeconomic factors whether that’s through policy or that’s just through the trends in the market you know, you have to remain aware of what’s happening in. In this world ensuring that you can kind of keep track of features that accommodate both recessionary periods where, you know, people are trying to being very cautious about what kind of technologies they’re adopting and using. To pay for things, but also in expansionary periods when people are a bit more experienced, you know, experimental and, and risk avert not risk averse risk tolerating, I would say, right.

And so, but it’s always

Steve Bell: Always.

Max: like, your, whether it’s your pricing or the rewards programs or, you know, security or transparency, like, all these are crucial, regardless of whether we’re in a recessionary or expansionary period of time. and ensuring that, like, can kind of track, like, what you’re, what you’re offering just despite whether we’re in one of those two conditions.

So, it’s, it’s being economically resilient in, in how your business goes to market, but also in how your business allows your consumers to transact with you. So, that summarizes the conversation in a pretty decent

Steve Bell: Yeah, great insights. I know I learned a lot every time I talk to you about these economic factors. So I always appreciate it for myself personally. But yeah, for everybody else listening to, you know, understanding these macro factors. It’s beneficial, but it’s more essential to be honest, and for, you know, meeting consumer needs, mitigating risk and really enhancing resilience it’s critical to really pay attention to this stuff and understand it as well, so, as always, you know, we love hearing from our listeners, please share your feedback on your experiences, add your questions about today’s topic got episodes coming up next week and beyond as well, so stay tuned for those, subscribe to all the listening platforms, you know, whatever your preferred is, and You can watch on YouTube, listen on Spotify, and Apple Podcasts as well.

But until then, we really appreciate y’all listening. Thanks for tuning in to Payment Pulse by Clearent by Xplor. We’ll see you next week.