Which Factors Influence Consumers’ Choice of Payment Method When Purchasing Online?

While researchers have studied the various payment methods for both online and in-store purchases, the available literature on factors influencing choice of online payment method needs further extension. Specifically, prior research does not indicate whether monetary value of a transaction is a key determinant of the payment method chosen. This study is aimed at contributing to the body of knowledge by developing an understanding of the key factors likely to affect the choice of payment method when customers are shopping online. The research questions for the study were as follows: RQ1: What are the factors that influence choice of payment method when consumers shop online? RQ2: Do perceived usefulness, ease of use, security and risk impact on consumers’ choice of either PayPal or credit card as a payment method? RQ3: Does the choice of payment method depend on the monetary value of the product being purchased online? To carry out this research, a quantitative research approach was adopted. The research used a scenario experiment, delivered via an online survey questionnaire as the research instrument. To analyse the information collected through the survey questionnaires, SPSS was used to produce descriptive statistics, ANOVAs and logistic regression analysis. Findings from the analysis indicate that respondents prefer to use a credit card rather than PayPal when shopping online. It was found that the respondents considered credit cards more secure, easier to use and to understand, and flexible. Furthermore, the respondents suggested that they tended to use the more easier to use, secure, and flexible form of payment, credit card, in making expensive purchase (branded items) but they engaged any form of payment when buying cheap items (unbranded items). This study also found that customers tended to choose a payment method which enables them to ensure a temporal separation between payment and purchase. The results indicate agreement with the literature review, that factors such as ease of use, safety and security, comprehensibility and privacy are considered important by online shoppers when deciding the method of payment. These findings indicate that consumers view these factors as determinants of their choice of payment method. If businesses could focus on these factors they would be able to positively encourage consumers to purchase online notwithstanding the value of their purchase or their choice of payment method