Pay Me with Venmo: Effect of Service Providers’ Decisions to Adopt P2P Payment Methods on Consumer Evaluations

The use of novel forms of payment, such as peer-to-peer (P2P) payment methods, has exploded in the marketplace. While businesses are adopting these payment methods, little is known about how consumers perceive service providers that adopted them. Service providers believe that adopting P2P payment methods makes them more appealing to consumers and increases the likelihood of transactions. Contrary to this view, in a series of studies, we demonstrate that consumers associate P2P payment methods more with social transactions than with business transactions. This leads consumers to rate service providers as warmer, and correspondingly less competent, and decreases the likelihood of transactions. Consumer judgments based on offered payment methods are enduring: consumers only adjust their evaluations of service providers over time if they had several unambiguous positive experiences that highlight business competence, but not when experiences are mixed (both positive and negative) or highlight warmth aspects of the business.