Paying hurts, because it is a loss - it is someone taking something from us. This is a recognised facet of our behaviour and has been proven to be alleviated by credit cards, with unfortunate consequences. When we pay with plastic we feel less pain because we aren't physically handing over hard cash, which has a visible value assigned to it, and we also aren't witnessing the depletion of this resource - the card doesn't change form or signal change in the same away a handful of pennies does and a lighter wallet does.
In a recent article the Canadian newspaper The Globe and Mail explored the consequences of moving toward a cashless society, enlisting the help of Dr Avni Shah, one of the world’s leading experts in how the pain of paying for things influences how much we spend and how we feel about what we’ve bought.
“Paying with plastic doesn’t really feel as vivid, as salient, or as painful as cash,”
Dr. Avni Shah.
Shah studied research that looked at how using credit cards influences the pain of payment. What it found is because the payment doesn’t show up until up to 30 days later when the users gets the card statement, the connection of the exchange of the pain of payment for whatever they have bought is weakened.
Whilst working for a famous coffee chain who were deliberating the cost of adding contactless terminals, author and behavioural scientist Richard Shotton (who has written for us previously) ran an experiment to prove a hypothesis he had. The experiment perfectly proved what he set out to know. When asking customers who had just walked out of the chain how much they had just spent on their coffee, the accuracy of those who paid with cash could be measured within pennies. Chip and pin payers were predominantly accurate to the nearest pound. The contactless customer frequently had no idea.
As a cashless society moves increasingly closer to reality, Shah worries that how we value money could change, especially when you think about how we grew up with pocket money and piggy banks. Back then cash had real, tangible value, we scrimped and saved for that shiny bike or games console. Will next generations of children value money in the same way?
A happy flip side of this painless transacting is the potential that saving can feel less painful too. Adman and behavioural science aficionado Rory Sutherland demonstrated this perfectly when he dropped an idea into a TED talk about ‘having a big red button to push and save money’ which would encourage impulse saving in the same way digital transacting usually encourages us to impulse purchase. Funnily enough a bank on the other side of the world picked this up and made it.
Find out more about behavioural marketing in our new report – Applying behavioural economics to marketing – 7 cognitive biases you can leverage today.
By Greg Copeland
Behavioural Strategist