How the payment mode influences human decision making

• Main Authors: Chan, Jarryl Weihan, Low, Yi Xuan, Kee, Yvonne Chun Feng
• Other Authors: Yohanes Eko Riyanto
• Format: Final Year Project
• Language: English
• Published: Nanyang Technological University 2020
• Subjects: Social sciences::Economic theory
• Online Access: https://hdl.handle.net/10356/137745
• Institution: Nanyang Technological University

With the rapid expansion and exponential growth in the technology field, the need for a cashless society has evolved to a great extent. The rise of digital payments, which includes traditional debit and credit cards as well as mobile payments, have contributed to the steady shift in payment habits among consumers. As mobile payments are relatively new, little research has been gathered on consumers’ behaviours using mobile payments, particularly in the area of donation and risk-taking. Therefore, this study hopes to provide some understanding on whether cashless payment modes in the form of mobile payment has an influence on individuals’ behaviours in their willingness to donate (WTD) and their risk attitude (RA) using the Donation rate and Investment rate of participants respectively in a series of economic experiments. The Gneezy and Potters method is utilised in the measure of RA. The Pratt-Arrow Coefficient of Relative Risk Aversion (CRRA) utility function is used to determine the degree of risk-loving among individuals. OLS regression models are used to analyse the effects of payment methods on WTD and RA. Secondary variables of interest and control variables are added into the models to test for the robustness of the results. From the results, it is observed that subjects violated the Expected Utility theory in their investment decisions. Loss aversion in prospect theory is thus utilized to explain for the seemingly irrational decisions. Overall, it is observed that the order effect and the gender have a great influence on the Donation rate and Investment rate. The order effect is statistically significant in the cash treatment but statistically insignificant in the cashless treatment. After taking into account the order effect, it is observed that the payment method is statistically significant in determining WTD, but there was a lack of evidence on its influence on RA. This study provides valuable insight into the future of charities in soliciting for donations using different payment methods and highlights to policy makers the importance of pushing forward initiatives to help gambling addicts curb with gambling addiction. For the purpose of our paper, payment mechanism, payment mode and payment method are used interchangeably throughout the paper.