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

Working paper 760
Working Papers

Published: 28 December 2022

By: Marie-Claire Broekhoff Carin van der Cruijsen

Consumers have been switching from cash to electronic means of paying and have become increasingly fond of online shopping. The COVID-19 pandemic has accelerated these trends. What these trends imply for the pain of paying that consumers experience has barely been studied. As pain of paying can help prevent overspending, it is important to research this topic. We designed a detailed consumer survey to do so. Using this rich 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. Interestingly, we find this for older people in particular but not for teenagers. Furthermore, the pain of paying is positively related to the price of the product or service and slightly lower for a fun trip compared to grocery shopping. The pain of paying is relatively high for women, highly educated people, people without a partner, people who find it hard to make ends meet with their income, tightwads (i.e. frugal people), people who frequently check their payments account and people with a low level of financial literacy. On average, cash is perceived to be most helpful in preventing overspending, whereas contactless payments are the least helpful.

Keywords: D12; D91; E42
JEL codes consumer data; payments; pain of paying; debit card; cash; contactless payment

Working paper no. 760

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

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Research highlights

  • As the psychological pain of paying can help prevent overspending, it is important to research how it depends on the payment method consumers use.
  • Using survey data collected among a large group of Dutch consumers, we find that electronic payments hurt less than cash payments.
  • This holds especially for contactless payments and iDEAL payments, a frequently used online payment method in the Netherlands.
  • Interestingly, we do not find this pattern for teenagers.
  • On average, cash is perceived to be most helpful in preventing overspending, whereas contactless payments are the least helpful.

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