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

Thaler (1998) asserts that mental accounting has three components- a mental cost-benefit
analysis of expenditures, the assignment of specific activities to specific accounts and
account balancing. The first component relates to the awareness of cost that is the price paid
and associated benefit of purchase. The second component is that people allocate money for
specific purposes such as bill payment, necessities and entertainment. As they also have
awareness of that they have finite resources, the third component relates to the act of the
tallying of these accounts, for example, people have idea of how much they have spent and
how much is left in savings. How we approach these tasks is affected by how we frame our
responses- responses that are influenced by the type of anchors used.
According to Soman (2003) the quality of our mental accounting, especially the accounting
that occurs at point of payment is affected by the degree of transparency – with the cash
payment mode being highly transparent. As Soman suggests (2001) cash use assists
remembering how much money is being ‘spent’ whereas the use of a card does not. So, using
cash as opposed to a debit card may link to different money management decisions. Other
mental accounting practices can affect transaction behaviour. If, for example, a specific
amount is set aside for bill paying, spending it for something else can magnify the
perceptions of the cost (price) of the purchased object. Similarly, having cash in a wallet,
given that it has been withdrawn from a savings account, may mean that it is deemed money
for spending rather than saving, whereas money in a bank account that is accessed via an
electronic payment mode may be deemed as money to be saved and not spent, even though
the account is established for every-day expenses.
3.3.2: Proposition Formation
As outlined in Section 3.3.1, the study acknowledges the role that the physical characteristics
of the payment mode plays in the formation of cognitions and emotions associated with
available payment modes. The questions are premised on the notion that the payment mode
(the stimulus) triggers responses that affects perceptions and behaviours during purchase
transactions. Tyszka and Prybyszewski (2006) suggest that people tend to use the nominal
value of money as an anchor when evaluating the value of goods, and that they neglect the
real value of money. The bias occurs due to the inappropriate choice of anchor, or the
36