A replication study of the credit card effect on spending behavior and an extension to mobile payments

Prior research has shown that credit cards increase spending behavior as measured by the willingness to pay (WTP) or basket value. This research aims to replicate the credit card effect and to extend this effect to mobile payments. In four empirical studies, of which three online studies and one lab study (total n = 692), we manipulated payment methods (i.e., cash, credit cards, and mobile payments) and measured spending behavior (i.e., WTP and basket value). Across four studies, we did not replicate the credit card effect on either measure of spending behavior, suggesting the effect in the literature may be inflated or may have been fading away. A meta-analysis of the relevant literature revealed the expected credit card effect but also showed that the credit card effect has become weaker through the years and that this effect is contingent on the location of data collection. We also did not find evidence that the credit card effect extends to mobile payments on either measure of spending behavior in the three online studies. However, we found a significant difference between mobile payments and cash on the basket value measure (but not for the WTP measure) in the lab study. This paper also explored whether the pain of payment or payment convenience may be a mechanism underlying the relationship between payment methods and spending behavior. Although the pain of payment tended to be lower and the payment convenience tended to be higher for mobile payments, these effects did not translate into more spending behaviors.     

Retail trade and payment innovations in the digital era: a cross-industry and multi-country approach

Abstract

This article introduces a novel approach to payment innovations. It t identifies a cross-industry (retail trade and retail banking) and multi-country (USA, some Western European countries and Japan) approach to the interaction between these industries and the new retail payment systems from the 1970s to the mid 1990s. It documents and discusses the different trajectories that have been seen in the different competitive environments, particularly in regard to payment cards. It also analyses the involvement of bankers and retailers in the evolution of card payment systems and their contribution to the global adoption of bank cards. These processes have occurred within a framework in which sectoral boundaries have taken precedence over the payment alternatives associated with cross-industry solutions.     

小议电子支付

电子技术的现状直接决定了电子商务的成败,而遵从电子支付协议,利用电子支付工具,是实现网上购物与实际支付的关键所在。电子支付的协议模式包括SSL和SET两种支付模式,电子支付工具包括电子信用卡、电子发票、电子现金三种。目前,电子支付工具存在的问题主要有支付工具的效力问题、税收与洗钱问题、网络安全问题。应限制电子现金的发行人,建立合理的电子现金识别制度,建立一定的密钥托管机制,同时,应从立法和技术两方面对网络进行逐步完善,避免网络遭到黑客攻击。     

Pricing of card payment services in Scandinavian banking: a comment

Willesson [(2009). Pricing of card payment services in Scandinavian banking. The Service Industries Journal, 29(3), 387–399] purports to demonstrate that when it comes to pricing of card payment services, Scandinavian banks with foreign operations will typically align themselves with the ‘pricing tradition’ in their foreign market(s). Unfortunately, a problem with Willesson's approach is that for several banks in his sample the foreign pricing tradition happens to coincide with the pricing strategy that the bank uses in its home market. As a result, it is impossible to determine whether these banks have really opted for a strategy of national responsiveness.     

The effect of credit card versus mobile payment on convenience and consumers’ willingness to pay

Extant literature on payment methods has focused on comparing cash and credit cards and emphasized the lower pain of paying (i.e., fewer negative consequences) for the latter. This finding, in turn, explains why consumers express higher willingness to pay (WTP) when paying with credit cards. The current study introduces mobile technology as a new payment method to this literature. Specifically, it highlights convenience as a positive driver of increased WTP for mobile payment. However, for consumers to perceive mobile payment as convenient, a personal adoption (enabled through an existing system in the respective country market) is necessary. A set of three studies across several country markets tests these assumptions empirically. Convenience emerges as a new mediator between mobile payment and increased WTP, contingent on personal adoption. These findings thus extend extant literature on the mechanisms consumers use with different payment methods, and they offer differentiated recommendations regarding payment channels for country managers.     

Pricing of card payment services in Scandinavian banking

Pricing of card payment services includes many considerations of cost and revenue in an environment of changing payment technology, network effects in two-sided markets and price bundling. This paper describes the consumer pricing methods for card payment services by Scandinavian banks and evaluates their explicit pricing methods. The main findings suggest that Scandinavian banks in general are more interested in earning revenue from implicit prices than in encouraging the use of more cost efficient technology by charging explicit transaction fees. However, the pricing methods applied may vary, depending on the country and a bank's service supply.     

基于电子信用卡网上支付的安全电子交易（SET）协议的研究

安全电子交易协议是电子商务中基于信用卡支付系统最典型、最常用的国际标准,该协议定义了客户、商家、支付网关及金融机构之间数据的流通过程,并对这些信息流都采取了数字加密及数据认证技术,以此确保网上交易的安全。但它过于繁杂的程序使得系蔓号承粤过重的负载,这个问题如今越来越引起了专家们的关注,并成为未来研究改进的重点。     

Reply to: pricing of card payment services in Scandinavian banking: a comment,by Leo Van Hove

A comment on the previously published paper ‘Pricing of card payment services in Scandinavian banking’ has been written by Leo Van Hove and published in this issue of The Service Industries Journal; it suggests alternative analytical approaches and other implications of the results. This reply develops the study further, providing new presentations of the empirical data and discussing its conclusions. The suggestions and approaches provided by Van Hove do not change the conclusions drawn in the paper, and in-depth implications of the results in a wider context are outside the scope of the paper. However, this reply proposes further empirical studies regarding the pricing of card payment services.     

Why do many consumers prefer to pay now when they could pay later?

Payment timing is conceptualized as a payment characteristic useful in explaining motivations to prefer payment types. Cash, debit cards, and online banking represent consumers' preferences to pay now, while credit cards and loans represent the inclination to pay later. Based on a grounded theory study, a payment-timing model is developed to theorize consumers' choices of payment types with differences in payment timing. The model presents four motivations for payment-timing preferences: (1) the extent of rewards salience, (2) the perception of financial stress, (3) adopting heuristics for money management, and (4) the influence of perceived financial ability. Consumers choose payment-timing options that best suit their financial strategy to manage payments in pursuit of their consumption objectives.     

A Smart Card Based Internet Micropayment Infrastructure: Technical Development and User Adoption

As online shopping services proliferate, the need for a secure and convenient payment infrastructure becomes critical. While credit card payment has become common for online purchases, a payment solution has not yet been developed that can be used to support transactions involving a monetary value in the range of a few dollars or even cents. In this study, the authors report their experience in developing a smart card based micropayment infrastructure in collaboration with a major bank. The infrastructure makes use of Mondex, a cash card standard adopted by major financial institutions worldwide. The infrastructure provides a platform to support online transfer of Mondex value over the Internet. Unlike other cash card products, Mondex is the only standard that can support card-to-card transfer without a mediating party. The transactions are immediate and anonymous. This article outlines the technical approach used in the development of the infrastructure and presents a behavioral adoption model to identify and assess factors that may affect its adoption. The findings indicate that the use of the adoption model in the early stages of product development can provide valuable insights to a development team. Theoretical contributions and practical implications specific to the Mondex Internet micropayment infrastructure are also discussed.     

Exploring factors influencing US millennial consumers’ use of tap-and-go payment technology

ABSTRACT

Although mobile payment (MP) represents a possibility for traditional brick-and-mortar US retailers to enhance the quality of customer service, mobile payment adoption in the US has lagged, with research regarding this phenomenon in the US seemingly in its embryonic stage. The current study contributes to the literature on mobile payment adoption in the US by investigating the factors on US millennial consumers’ use of mobile payment technology, operationalized in the study as tap-and-go payment systems. The study mirrors a study of the acceptance of mobile shopping technology among German consumers, with some extension. The study incorporated mobile payment risk perception, system trust, and socio-cultural influence into an extended technology acceptance model (TAM) to explore this issue. Results from a survey conducted among 357 US Millennials indicate that perceived ease of use of MP (PEOUMP); perceived usefulness (PUMP); and risk perception all influence attitude toward mobile payment (AttMP). System trust, socio-cultural influence, and AttMP all influence MP use intention. The paper discussed the limitations of the study and future research directions.     

构建和谐社会的转移支付制度——日本转移支付制度对我国的借鉴

构建和谐社会是适应我国改革发展进入关键时期的客观要求,体现了广大人民群众的根本利益和共同愿望。作为市场经济条件下协调区域经济发展、缩小地区差距的主要手段,财政转移支付制度发挥着重要作用。我国正处在市场化改革的转轨时期,现行的财政转移支付制度具有明显的过渡性和非规范性。国家财政应按照构建和谐社会的要求,改革我国转移支付制度,优化财政资源配置。日本是一个中央财政集中度较高的国家,其转移支付制度有着鲜明的特点。为此,我们可以借鉴日本转移支付制度的经验,规范我国的转移支付制度,灵活地、有针对性地选择转移支付方式,大力发展公共事业,完善转移支付制度中的机构设置,加强监督管理,推进省以下财政转移支付制度建设。     

Exploring Consumers' Perceptions of Online Credit Card Theft

Abstract

Retailers offer consumers assurances and attempt to allay their fears over using their credit card for online transactions. Consumers, however, may not be reacting to these assurances. This exploratory study examines how consumers assess the risks associated with using their credit card online. Results of this study support the notion that consumers assess risk in a multi-dimensional manner. Consumers may be concerned with the possibility of losing many forms of resources (such as financial and time).     

信息不对称对信用卡市场的影响分析

信用卡产业在我国已步入快速发展的轨道,然而宽松的发卡策略加剧了持卡人和发卡行之间的信息不对称,继而诱发信用卡支付危机。鉴于此,在声誉(KMRW)博弈模型基础上建立了发卡行和持卡人之间的声誉博弈模型,分析了持卡人、发卡行的声誉与信用卡市场上的信息不对称之间的关系,提出引进第三方治理机制作为KMRW模型自我实施机制的加强和补充,以更有效地缓解信用卡市场上的信息不对称。     

Payment method and perceptions of ownership

How consumers pay influences how they feel about a transaction. In particular, paying by card has been argued to have an effect on the perception of cost, making it less salient and painful. We propose and show that payment method also influences how consumers feel about the acquired good. Specifically, we focus on effects of the payment method on psychological ownership, i.e., the perception of an object as “mine.” We propose that cash payment results in stronger psychological ownership because it influences the extent of perceived investment in an object. We provide evidence for the proposed effect from field and laboratory settings. Results of a longitudinal exit survey and an experiment show that cash payers report higher levels of immediate psychological ownership than card payers. However, this effect seems to depend on the meanings associated with a payment method. Asian students (who associate credit card payment with investment and debt) do not exhibit this effect. Moreover, the initial boost in psychological ownership seems to be comparably short-lived. While those paying in cash experience no further increase in psychological ownership over time, those paying by card do.     

Beyond the Retail Store: An Evaluation of Goods Acquisition Practices in British Deprived Urban Neighbourhoods

All major credit card issuers, to a greater or lesser extent, are holding a portfolio consisting of three types of credit card holder: (i) non-active card holders; (ii) non-interest paying active card holders; and (iii) interest paying active card holders. This article, using two quantitative techniques more commonly associated with credit risk management or credit scoring, is concerned with identifying the characteristics of active card holders with the greatest propensity to revolve (i.e. pay interest). The sample consists of 27,681 bank credit card holders who had held and used their card in the 14 month sample period. Data was available on 313 socio-demographic and behavioural variables for which, a priori, there was good reason to include so as to discriminate between users who paid interest on their outstanding balances (i.e. revolvers) and those who did not. The main result of this research is that the most important discriminating variables are derived from the card holder's behaviour (i.e. cash advances, minimum payment due, interest paid in previous periods). This result is derived from and supported by the two competing techniques used for the analysis: Linear Discriminant Analysis and Logistic Regression.     

Smart Card-Based Electronic Card Payment Systems in the Transportation Industry

Many products and services will soon be (or are already being) sold over the Internet or other networks. Paying for these with standard methods of payments, such as cash, checks, credit card, or debit card, may be ineffective or inefficient. For such cases, electronic card payment systems are more appropriate. Several things need to be considered when investigating electronic card payment system options, including: customer needs and benefits, developmental and operational cost, corporate benefits, continually changing technologies, critical mass of customers, security, standards of payment systems, and customer perception and comfort with new technologies. In this article, we analyze how smart card-based systems are used in mass transportation. Managers in mass transportation face the following questions: Do you develop your own electronic card payment system, do you wait for multifunctional cards that will be accepted across many industries to provide the functionality required in your market, or do you do nothing. The discussion here concentrates mainly on the transportation industry, where the transactions and payments are made on local area networks.     

Ethical Issues in Credit Card Solicitation of College Students – The Responsibilities of Credit Card Issuers,Higher Education,and Students

Credit card companies aggressively solicit college students, without regardfor the consequences of high credit car debt for these customers. Theethical conflict of the sale of easy credit to college students too oftenresults in hazardous outcomes akin to the solicitation of youth by cigarettecompanies. This paper will investigate the dangers that credit card use presents to theyoung customer, the unethical manner in which the companies that issue these cards promote their products to this audience, and the role of institutions of higher education. A majority of students are not only using credit unwisely (average balances of over $1000 regardless of who reports the data) but are payingexorbitant interest (18%–22%). The credit card companies call this``responsible' use. They are collecting enough interest and fees to morethan cover losses resulting from bankruptcy. They use a variety ofmarketing techniques to lure college students – glitzy `MTV' type shows,free prizes and gifts, special interest rate offers, and now they can pretendthrough `educational services' to explain to college students why credit cards are important.This paper investigates the ethical considerations of credit card solicitationof college students as a result of research into factors that influence thenumber of credit cards held by these students. Current solicitation policiesof colleges and universities are also presented.     

What else can your payment card do? Multifunctionality of payment modes can reduce payment transparency

Payment modes (e.g., cash vs. credit card) vary in the transparency of the outflow of money. Smartcards (multifunctional cards), which bundle payment with non-payment functions (e.g., loyalty programs, identification, and other information functions), have become an increasingly popular payment mode. This shift toward multifunctionality in payment modes is assumed to reduce payment transparency and consequently to decrease consumers’ recall accuracy of past expenditures. We employ a field study to examine recall accuracy for recent purchases with cash, a single-function card, and a multifunctional card. We find that recall accuracy is lower when using a single- or a multifunction card than cash. We also find that it is not the multifunctionality of the card that results in a higher recall error but the individual usage patterns: A higher usage frequency of the non-payment functions results in a higher recall error.     

Credit cards in the United Kingdom—where the power lies in the battle between the banks and the retailers

This paper looks at the development of the two types of credit card systems in the UK, the bank credit cards and the retailer credit cards. The article seeks to address the issue of who will hold the balance of power at the introduction of an EFTPOS, or direct‐debit, system into the UK. The situation in 1988 appears to be that retailers are well up the “learning curve” as regards the management and marketing of credit and so are increasingly proving to be a threat to the banks not only in the provision of credit but also in offering a wide range of financial services.