Cash or Card: Consumer Perceptions of Payment Modes - Scholarly ...

1.1: Overview
Chapter One
Introduction
In 1979, Hirschman lamented the lack of research in the area of payment mode effects on
point of sale purchase behaviour. She suggested that this lack may be due to the assumption
that there are no significant differences among payment systems and that even if there were;
the differences did not affect purchase behaviour (Hirschman, 1979:58). In 2006, Schreft
noted that the situation had not changed. However the topic has not been totally ignored as
there are studies that examine the effect of credit card use compared to cash; these studies
indicate that credit card use, when compared to cash, increases the overall amount spent per
transaction (Hirschman, 1979; Feinberg, 1986; McCall and Belmont, 1996; Prelec and
Loewenstein, 1998; Prelec and Simester, 2001; Soman, 2001; 2003; McCall, Trombetta, and
Gipe, 2004; Raghubir and Srivastava, 2008). Prelec, Loewenstein, Simester, and Soman,
propose that the increased spending behaviour is due to a ‘decoupling’ effect; the idea being
that electronic payment modes lack transparency so that the actual cost of the transaction is
obscured. Some researchers also suggest that consumers experience psychological pain when
parting with cash. The explanation being that the physicality of cash creates an acute
awareness that something of value is being transferred (Prelec and Loewenstein, 1998;
Raghubir and Srivastava, 2008; Soman, 2003; Thomas, Desai and Seenivasan, 2011;
Zellermayer, 1996).
Two aspects of these studies limit our understanding of this phenomenon. One is that the
studies focus on the use of credit cards and the other is that the only emotion recognised is the
experience of psychological pain- pleasure. This means that the outcome of using personal
savings as opposed to borrowed money when using an electronic payment is not fully
explored. Also, by focusing on pain-pleasure, the possibility of other cognitive and
emotional associations is overlooked. The purpose of the study is to examine the cognitive
and emotional associations that people have with payment modes, particularly cash and debit
card and to ascertain if and how these associations impact on payment mode choice and how
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