Stephanie Watson, Senior Strategist at behavioral planning agency Total Media shared that Shoppers will soon be able to spend up to £100 with a solitary tap as the government doubles the current £45 contactless expense cap. Learnings from behavioral science propose this may well be to the disadvantage of our bank balances. Contactless payment has been the most accelerated trends since the pandemic as it is driven by the need to lessen the health risks of handling physical cash or touching the keypad surfaces and consumers have been motivating to acquire contactless transactions via debit cards, credit cards and smartphones or wearable technology. This changed habitat and behavior for many. For those who have preferred the scrutiny of PIN or cash have been forced to make the shift to contactless. The Financial Conduct Authority (FCA) had said that it is important that payments regulation kept pace with customer and merchant expectations, but how will this influence the amount we spend, and the expenditure. Compensation limits set anchors in our minds about worth. The procedure of arriving a PIN for a contract over the present £45 limit sets that item as an advanced value in our minds, meaning we are basically anchored to that £45 amount. Increasing the limit to £100 consequently is likely to mean that societies will infer that spending £100 in one transaction is normal. In turn, this may push them to spend more. Behavioral economist Dan Ariely had written about the pain of paying which suggests that when the clients pay using cash, it gives experience for more psychological pain. According to this theory, a segment of brain which is associated with feelings of pain gets activated while we pay for expensive items but the research conducted by MIT established that this region was far less active when paying by card compared to cash payments. So having a more pleasant experience means less psychological pain which pays way for the opportunity to purchase costlier items. Just like the pain of payment, entering a PIN or handing over the cash adds similar friction to our sub conscious or our cognitive processing of the transaction whereas the process of contactless transactions are convenient and require only minimum efforts. But the physical mode of payments might encourage second thoughts at the time of purchase like the ones we see at the time of online shopping, where in we cut down the orders at the time of purchase with the conscious thought. Whereas a hassle free payment is therefore automatic, meaning it will be very less likely to evaluate if to buy an item or not.
Richard Shotton, the behavioural marketer showed that the contactless payments reduced the sensitivity to the price. Comparing claimed comebacks to revenues, he found those who paid by cash overvalued spend by 9% and those who paid by contactless undervalued spend by 5%.
The use of contactless through the pandemic has clearly been an important health necessity. Now consumers have had a taste of the profits and convenience of increased contactless payment, they may well advocate increasing the limits. These behavioral prejudices however highlights all the risks to the economic welfare of customers if contactless limits are therefore increased. Going forward, there should be some regulation to ensure the most susceptible are protected from the inferences and this kind of move does not result in the customers experiencing a debt at the time of financial strain.