The Pain Of Paying

Ben Ambridge

Picture the scene: It’s been a tough year at work but, finally, here you are on your summer holiday. You stretch out by the pool with a cocktail, feeling contentedly full from your delicious buffet lunch. Bliss. In the evening, you relax with a few more drinks before dancing the night away at the hotel disco. Exhausted but happy, you head off to bed…

…But on the way, you’re stopped by a staff member, who presents you with an itemised bill for the day. It’s all here: a day’s room rental, meals, drinks, room-cleaning fee, towel-hire charge, surcharge for wear and tear on the carpets.

Oh, and your day’s bill must be paid here and now. In cash.

Would you go on a holiday with a company that charged like this?

Of course, you wouldn’t. You’d much rather pay all in one go at the end or, even better, up-front for an all-inclusive deal.

Why? Because of what Consumer Psychologist Dr Ofer Zellermayer famously dubbed “the pain of paying”.

Although it may sound like common sense, the idea of the pain of paying actually flies in the face of the received wisdom of economists. Standard economic theory holds that consumers rationally weigh the costs and benefits of each possible transaction.

If the goods offered to you (e.g., a round of drinks at the hotel bar) are worth more to you than whatever else you could have bought with that money (the “opportunity cost”), then you will go ahead and make the transaction. If they’re not, you won’t.

In real life, of course, this isn’t how it works at all. When deciding whether or not to make a purchase, people factor in not just how much they want whatever is on offer, but the pain they will feel as a result of spending the money.

Interestingly, the findings of one recent study1 suggest that the “pain of paying” isn’t just a metaphor. A brain-scanning study led by Nina Mazar of the University of Toronto found that similar brain mechanisms were responsible for affective responses to pain (“Oooh, I don’t like THAT!”) whether that pain was physical (an electric shock) or involved paying for something with cash.

Mazar’s findings build on previous studies of hypothetical purchases which found that people find paying with a credit card considerably less painful than paying with cash2, and also prefer to pre-pay for purchases3 (which explains the meteoric rise of all-inclusive holidays).

This is presumably also the main reason why bricks-and-mortar casinos use chips rather than cash. Pushing a pile of chips across the table does not feel like withdrawing a week’s wages from the bank in cash and handing it over.

Interestingly, most gambling websites use pounds and pence instead. Is this because online transactions are already sufficiently far-removed from cash to avoid most of the pain of paying, or are they missing a trick?

Either way, the lesson for you is that if your site can somehow decouple purchase decisions from the pain of paying, you can potentially see a boost in your conversions. Sites that do this well include Apple’s App store and, in particular, Amazon Prime’s “Swipe to purchase”.

Even better, if it fits with your business, is the all-you-can-eat model, which has spread from holidays and buffets to mobile data (e.g., Three) and, perhaps most significantly, music streaming, where sites such as Spotify have virtually killed off the idea of handing over physical money for a physical record.

If you can find a way to minimise the pain of paying, then just maybe you can herald a similar revolution in your own sector.


[1] Pain of Paying? – A Metaphor Gone Literal

[2] The Pain of Paying

[3] The Red and Black: Mental Accounting of Savings and Debt