They say a fool and his money are soon parted, and in the era of so-called frictionless electronic payments, we are all, potentially, fools. This week Apple announced Apple Pay, which will require nothing more of iPhone 6 users than a wave of their phones in order to commit to a purchase. On the one hand, it’s reportedly more secure than your credit card. But some behavioral scientists and consumer psychologists say that the ease of Apple Pay will introduce more thoughtless, impulsive spending.
No one has yet studied how technology like Amazon’s One-Click method or the Uber app affect consumers’ purchasing behavior as compared to traditional payment methods like credit cards or cash. But past research into the transition from cash to credit cards suggests that not only do consumers spend more impulsively when paying is easy, but that they are also willing to pay more.
One 2001 study, for example, found that college students bidding on tickets to an NBA game offered to pay twice as much when they were told they could make the payment with a credit card as compared to a group told they had to pay with cash. Follow that logic, and it’s possible that “electronic payment can easily lead to more reckless spending,” said Dan Ariely, the behavioral economist and author of Predictably Irrational: The Hidden Forces That Shape Our Decisions.
When compared with cash, credit cards weaken what consumer psychologists call the “pain of payment,” Ariely said. “The pain of payment is kind of the agony of giving money away.” It’s a balancing act between what you get and what you give up, and in order for the purchase to be “worth it,” the gain has to outweigh the pain. The trouble is, a frictionless payment system can make it harder to get a good handle on what, exactly, it is that you’re giving up. (Take Uber: Sometimes, if I’m honest with myself, I use the app at least partially because the automatic payment system makes it feel free.) With cash, on the other hand, “you feel it leaving your wallet in a stronger way; with credit, you feel it in a weaker way,” Ariely said. And with electronic payments, you’ve removed even the physical cue of the credit card in your hand, which presumably means you’ll feel the pain even less. (Of course, you may eventually start associating your phone with the loss of money, which may negate this effect.)
And the relative painlessness of modern payment systems means those purchasing decisions might be more influenced by implicit attitudes, or “knee jerk judgments,” said Ian Zimmerman, who studies consumer psychology at the University of Missouri. “Those attitudes tend to be more automatic and we experience them immediately after we encounter something and before we carefully evaluate what we’ve encountered,” he said, “meaning that a consumer who was spending without thinking carefully might be more influenced by them.” For example: You see a T-shirt. You want the T-shirt. With just one click of the mouse or tap of your smartphone, the T-shirt is yours — never mind the fact that winter is around the corner, and if there had been more hurdles in the payment process, you might’ve thought of that and decided against the purchase. Overall, when paying is easy, the path from seeing an item to wanting an item to buying an item is a much shorter, more straightforward one.
But there are some potential ways to fight against impulsive spending in the age of Apple Pay. It’s not yet clear exactly what the technology will look like, but imagine if the app came equipped with real-time updates on how much we’re spending. “It could show our total balance to date, how much we’ve spent on a particular category, or how we’re doing against a pre-set budget,” said Piyush Tantia, executive director of ideas42, a nonprofit that applies behavioral economics to social problems. “Most importantly, the feedback [would] come just before we pay, so there’s a chance we’ll put that $5 bar of Godiva chocolate back on the shelf when we see in big red letters that we’ve already exceeded our budget for the week.”
What it comes down to is that “our decisions are an outcome of the environment we’re being put in,” as Ariely put it. “So while we think that we make decisions, and we’re in charge, and we decide what to eat and what to wear and so on — the reality is that many of our decisions are dictated by our environment.” There’s a reason Ariely and other behavioral researchers harp so frequently on the fact that even small changes in our environment can yield big changes in behavior.
It’s why, when you’re driving, you’re better off putting your phone in your trunk instead of attempting to will yourself into ignoring the buzz of a new message. It’s why people in a classic study consumed more soup when they were given a bowl that imperceptibly refilled as they were eating, compared to people eating out of a normal bowl. And it’s why, if you’re not careful, frictionless payment systems can result in your purchasing useless stuff you don’t want — and definitely don’t need.