Paying in a blink of an eye: it hurts less, but you spend more

The key objective of this research is to gain a deeper understanding of the factors associated with pain of paying and to extend knowledge of the consequences. Using rich consumer survey data on the Netherlands, we find that electronic payments – both online and offline – hurt less than cash payments. This holds especially for contactless payments and iDEAL payments, a frequently used online payment method in the Netherlands, and for older people in particular but not for teenagers. Furthermore, the perceived pain of paying is positively related to the price of the product or service and slightly lower for an outing compared to grocery shopping. In addition, the pain is relatively high for individuals that are likely to value money more, such as people who find it hard to make ends meet with their income. On average, cash is perceived to be most helpful in preventing overspending, whereas contactless payments are the least helpful. The lower the perceived pain of paying contactless is in comparison to the pain associated with other payment methods, the lower its perceived usefulness in preventing overspending. Moreover, the intensity of use of contactless payments is negatively correlated with the relative pain of paying contactless, which suggests that people try to avoid the pain of paying. As the usage of cash is declining, it is important that policymakers develop tools that help consumers in averting overspending when utilizing electronic payment methods, particularly contactless ones.