The Effect of Payment Format on Consumer Affect and Behavior

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Abrams, Deborah
Bond, Samuel D.
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All else equal, consumer evaluation of a purchase should not logically depend on the form of payment that is used. However, voluminous research on the “pain of payment” phenomenon has shown that payment format impacts transaction-based affect, cognition, and behavior (Prelec and Loewenstein, 1998; Soman, 2003; Raghubir and Srivastava, 2008). As introduced by Zellermayer (1996), “pain of payment” captures the notion that the physical act of paying for a product or service induces a negative emotional response. This response takes the form of “hedonic vexation” that is related to but distinct from physical pain, stress, or the fear that spending money will diminish future buying power. Given the introduction in recent years of entirely new payment formats, including many consumer-to-consumer payment platforms (e.g. Venmo, PayPal), it is more important than ever to understand how consumers feel and behave when making payments or receiving money. In chapter 1, I focus on the receiving end of the transaction by exploring how consumers react to being paid in cash versus other monetary formats. To address the question, I define “joy of receipt” (JOR) as a positive affective reaction that consumers experience when receiving money. I consider the extent to which different monetary formats produce different JOR, as well as the ramifications for subsequent spending behavior. Three studies show that consumers feel momentarily wealthier when they are paid in cash (an especially salient monetary format) than credit or mobile payments. These feelings of wealth lead to greater joy of receipt and a greater likelihood of spending. Chapter 2 focuses on the relationship between payment format and pain of payment. Previous work has identified temporality and transparency as important drivers of the pain of payment phenomenon. However, that work has largely ignored the wide variety of payment formats that have emerged in recent years. I argue that novel forms of payment lead to consumer excitement (a positive emotion), and thereby lower pain of payment. In a series of studies, I demonstrate that consumers experience less pain of payment when paying with a mobile phone than with a credit card or cash. Additionally, I argue that novelty in a payment format need not depend on technological innovation. As evidence, I demonstrate that the design and denomination of currency can also be used to create perceived novelty.
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