Confessions of a mobile shopaholic

June 12, 2014

–Martha McKenzie-Minifie is Editor of International Consumer Economics and Ian Bright is Senior Economist at ING. The opinions expressed are their own.–

In the 2009 film Confessions of a Shopaholic, Rebecca Bloomwood remembers herself as an enchanted seven-year-old, watching shoppers hand over their credit cards and walk out of the store with new shoes, dresses and other shiny, sparkly splurges: “They were beautiful, they were happy. They didn’t even need any money. They had magic cards.”

Academic research into the “pain of paying” suggests that people tend to react differently to shopping on credit card than they do to shopping with cash. In their famous paper The Red and the Black: Mental Accounting of Savings and Debt, the authors Drazen Prelec and George Loewenstein, argue that credit cards alter the point at which the “pain” of paying for something happens – making it tempting to enjoy goods or services immediately only to feel the pain when the bill arrives in the future. With cash, they contend, that pain is more immediate.

That paper was written back in 1998 and since then the payment landscape has changed dramatically: contactless payments; moving money by text message; mobile banking.

Research released last month that we wrote finds that smartphone uptake seems to be having a wide range of effects, including driving impulse purchases for some people.  Our ING International Survey on Mobile Banking 2014 found that of more than 12,000 people surveyed in 13 countries, Brits have the greatest appetite for impulse buying.

Of our sample, about 5,000 people use mobile banking, but the technology appears to be a double-edged sword.

While some of the reported changes in behaviour of our mobile bankers are positive (such as checking accounts more often and not missing payments), there was also a significant rise in the likelihood to regularly buy something on impulse: 40% of mobile bankers say they are likely to buy on impulse compared to just 28% of non-mobile bankers. Does ready access to their bank balance give them a sense of financial security to buy now?

It comes as little surprise that the things we do change as the tools we have access to evolve. But it can pay to be aware of the potential downsides.

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