University of Toronto's Professor in Marketing, Dilip Soman, published an academic study in 2003, in which the researcher demonstrates how differences in the transparency of cash and other payment forms influence consumption.
Soman's study, 'The Effect of Payment Transparency on Consumption: Quasi-Experiments from the Field' draws from past payment behaviour experiments from Hirschman (1979) and Prelec and Simester (2001), to further show how consumers who pay with credit cards will typically spend more than those who use cash or checks.
'We argue that payment mechanisms differ from each other along the dimensions of transparency, and that the degree of transparency correlates positively with the pain of paying using the mechanism, and negatively with consumption and spending.'
Excerpt from University of Toronto study
Consider payment by cash as the benchmark transaction. In paying by cash, the payment is very salient in both physical form (i.e., it is easy to see that money is being spent) and in amount (i.e., since cash has to be counted and given, the amount is relatively memorable). In moving from cash to check payments, the salience of the physical form weakens some- what, but the amount is reinforced (since it has to be written in words and numerals).
With credit cards, the salience of both the physical form and the amount is weaker (i.e., cards don’t have the physical properties of cash, and the opportunities to reinforce the price are low). And with electronic and mobile payments (like the Hong Kong examples discussed earlier), the salience is even lower.
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