Cashless Society And Plastic Money

Published Date: 02 Nov 2017

With the rapid expansion and exponential growth in the technology field, the use of plastic money and the need for a cashless society has evolved to a great extent. The cashless society, where clumsy and expensive-to-handle coins and notes are replaced by efficient electronic payments initiated by various types of plastic cards is a tantalizing prospect for the twenty-first century. ("The Cashless Society", International Journal of Retail & Distribution Management, Vol. 23 Iss: 7 pp. 31-40).

The rapid growth of the use of the plastic payment card at the point of sale (POS) and consequent erosion of the use of paper cheques and to some extent cash, has led to claims that UK could be the first cashless society (International Journal of Retail & Distribution Management, 2001). Figures from the Bank for International Settlement in 2001 showed that plastic cards have overtaken cheques as the most common non-cash payment instrument and countries like South Korea and Australia was expected to follow the same trend. Over the past three decades plastic cards have become increasingly available to household as credit cards issuer have extended credit to customers. By June 2009, the VISA network excluding Europe operated with more than 16000 financial institutions and though its members had issued 1.7 billion cards with a total annualized number of transactions of 4.3 trillion (International Journal of Consumer Studies, 2009).

Over the last three decades, researches focus on consumers buying habits for certain goods and services and most importantly the reason behind their purchased. Nevertheless, very little consideration was paid by the means of payments they used. Hirschman (1979) pointed out several causes and have concluded that there was no difference between alternative payment systems and if there were any differences. However, according to Hirschman’s analysis, the payment system was influenced by many factors both demographic and card specific. The factors that were likely to influence the payment system were: like income, interest rate, prestige and outstanding debt on card (International Journal of Consumer Studies, 2011).

The buying habits with respect to the emerging cashless society and plastic money is scrutinised and explained by Sporleder and Wilson (1974). The supply and availability of money is indeed of utmost importance when considering the purchasing behavior of consumers. Therefore, consumers’ buying habit depend more on the availability of money and surely spending on purchase can be different if a consumer has a good plan for money.

However, using cards as a mean for payment is a system that certainly lack ‘transparency’ and it had limited attention. An emergent view is that plastic system create a mental ‘decoupling’ and that the pain of paying (the emotion consumer experience in parting with money) is reduced (Soman, 2001). Furthermore, he suggests that payments by cash and cheques are both memorable and painful and that plastic cards payments are less so as its payment mode is low in both salience and vividness. This causes an underestimate of past spending, and an increased propensity to spend more in the current transaction.

Hence, a cashless transaction does not evoke the thought of the amount of money spent at the time of purchase as compared to cash payment which evokes thoughts about costs/benefits of purchase as time of purchase (Prelec and Loewenstein 1998, p.25) and according to the First Data article (2010) plastic money has increasingly become the most wanted method of payment for consumers to pay for goods and services. Plastic transactions have surpassed more than 50% of all non-cash transactions by 2006, up from 42% in 2003 (Federal Reserve, 2010). Cash transactions, at 10 per month in 2010, represented 26% of a customer’s in-store purchases, down from 39% in 1999, according to a 2008 study by Hitachi Consulting and BAI.

2.2 THE BEHAVIOURAL ASPECTS OF CONSUMER

Professor Lars Perner (1999) said " the study of individuals, groups, or organisations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society."

With reference to (Loudon & Bita, 1988), the theory of consumer behavior is the decision process and physical activity individuals engage in when evaluating, acquiring, using, or disposing of goods and services. The behavioural aspects of consumer are very delicate mainly with the disadvantages attached to them and as such most of the time their opinions are indifferent to their true thoughts. They may not act with respect to their inner motivations and may react to changes influencing their tastes at the last minute (Kotler, 2003).

Professor Lars Perner (1999) developed certain theories and they are:

Consumer behaviour is for individuals, or for a group or an organization.

Consumer behaviour involves using and dispose of products as they are bought. The use of a product to a firm is of great importance as it may affect the product on how it is positioned or how its consumption can be increased.

It also involves services and ideas like physical products.

Therefore, the theory of consumer behavior is the decision process and physical activity individuals engage in when evaluating, acquiring, using or disposing of goods and services (Loudon and Bita, 1998).

The concept of consumer behavior is a very controversial matter and is attached to many drawbacks. Consumers may not act accordingly and with respect to their own decision and motivation and may react to changes influencing their tastes at the last minute (Kotler, 2003).

2.3 PLASTIC MONEY AND ITS INFLUENCES TOWARDS CONSUMER BEHAVIOUR

Customers have always been the centre of attention and Bhasin (2010) said that it is essential to follow and study the buying habit as customers cannot be taken for granted and has stated the factors that affect their purchase. Moreover, Bhasin adds other factors such as social, cultural, personal and psychological as main determinants of consumer behaviour.

Figure below: Factors affecting consumer behaviour

For instance, the gaming organizations have found that many people are interested in gambling and hence, they have started to invest in plastic card so as to enable the players to have a better gaming system. Globally, there exist more than 2.7 million electronic gaming or slot machines (TNS, 2008), which, depending upon the regulations of each jurisdiction, can be found in a variety of venues. ("The role of employees in encouraging customer adoption of new gaming machine payment technologies", International Journal of Contemporary Hospitality Management, Vol. 21 Iss: 4 pp. 422-436). However, there are certain restrictions in using Card based payment technologies for electronic gaming machines. Cashless player cards are one permanent mechanism that has been widely touted by industry and government for their perceived ability to minimize the harms associated with excessive gambling and to generate operational efficiencies for venues (Independent Pricing and Regulatory Tribunal, 2004; Nisbet, 2005a; Omnifacts Bristol Research, 2005). ("The role of employees in encouraging customer adoption of new gaming machine payment technologies", International Journal of Contemporary Hospitality Management, Vol. 21 Iss: 4 pp. 422-436).

In Australia there are just over 185 000 machines (TNS 2008), 100 000 of which are located in New South Wales(NSW) registered clubs and hotels(Office Economic and Statistical Research, 2006). ("The role of employees in encouraging customer adoption of new gaming machine payment technologies", International Journal of Contemporary Hospitality Management, Vol. 21 Iss: 4 pp. 422-436).

2.4 Cultural Factors

Cultural factors have more influence on consumer behavior and it is divided into the individual’s culture, subculture and social class (Kotler 1999, p.230).

The table below illustrates the cultural factors of consumer behavior:

2.4.1 Culture

Culture exists to satisfy the needs and wants of the people within a society. It offers order, direction and guidance in all phases of human problem solving by providing ‘tried and true’ methods of satisfying physiological, personal and social needs (Schiffman & Kanuk 1994, p.410).

Kotler (1999, p.230) suggested that culture is the most basic cause of a person’s wants and behavior. Growing in a society, a child learns basic values, perceptions, wants and behavior from the family and other important institutions. He also mentioned that marketers always try to mark cultural shifts in order to create new products that might be wanted. In the Journal of Development and Agricultural Economics 2009, functional foods have gradually entered the market in developing countries but very few people know about their status. In Mauritius, structured questionnaires were administered to 200 consumers through personal interviews. 40% of the interviewees were found to be aware of functional foods, even though 89.5% of them were actually consuming them. (Journal of Development and Agricultural Economics Vol. 1(9), pp. 204 – 211, December, 2009).

This cultural change pushed the marketers to have a well diversify way for functional foods in order to satisfy the emerging needs of the consumers. In other hand, banks would prefer that its customers use plastic payment services. Nevertheless, Islam has a different point of view concerning credit cards. Now, banks have the duty and challenge to respect this culture and to act differently so as to abide with respect to the Sharia (Islamic Laws). According to the Sharia, credit cards is permissible in Islam as long as one does not delay paying the bills and pay the total amount on time whereas in other countries the use of credit card is forbidden even if the user is certain that he will pay the bank on time (Link Muslims, 2010). Taking this culture into account, the Standard Chartered Bank launches global Islamic banking brand ‘Saadiq’ in Mid East. (Pakistan Standard Chartered, 2007).

2.4.2 Subculture

Culture has a major influence on consumer behavior as people are brought up to follow the beliefs, values and customs that they have been taught. Hence, marketers have the responsibility to study the beliefs, values and customs that exist within an entire society. Furthermore, subgroups or subcultures that are homogeneous in relation to certain customs or ways of behaving are created to narrow the focus with cultures. The members of a specific subculture possess beliefs, values and customs that set them apart from other members of the same society (Schiffman & Kanuk 1994, p.443).

According to Kotler (1999, p.231) subculture is defined as a group of people with shared value system based on common life experiences and situations. Furthermore, he added that subcultures provide more specific identification and socialization for their members.

2.4.2 Social class

In all societies, there exist social class hierarchies that differentiate higher status to some class of people than to others. Thus, having different social classes also differ them from their behavior and lifestyle. In short social class hierarchy is defined as the grouping of members of society according to status high to low (Hoyer&Maccinis 2008, p.326). Social class is not determined by a single factor such as income, but is measured as a combination of occupation, income, education, wealth and other variables. Some class system has a greater influence on purchasing behavior than others (Kotler 1999, p.235). .

Conspicuous consumption, related to social class as an attempt to buy items because it illustrate a message of status or elitness to others. Evidently some goods are bought to be show off and to reflect one status. For example, BMW sounds more luxurious as compared to Toyota and someone might feel more flattered while paying with plastic cards other than coins and notes. In other words, that customer using plastic money as a source for his transaction might feel more valued as compared to others using physical money. However, conspicuous consumption tends to have a problem known as conspicuous waste which means that visibly buying goods and services that one never uses (Hoyer&Maccinis 2008, p.326).

Compensatory consumption is an attempt to offset deficiencies or a lack of esteem by devoting attention to consumption. A consumer who is experiencing frustration or difficulties to pay for his monthly bills or mostly deals on the internet products might find it difficult to pay using the cash system. So this person might compensate for his lack of success by purchasing desired status symbols such as switching to plastic money to fund his online shopping or internet shopping or to accelerate his payment (Hoyer&Maccinis 2008, p.326).

The meaning of money leads marketers to understand the true value of it and how it is related to consumption patterns. Money was always associated with status and it has allows people to acquire products, status or prestige. This makes them higher in the social class. However, the exponential growth in the cashless society with the usage of plastic money, it shows that money needs not to involve physically. Even in nations like Kenya, where cash has long been the accepted payment method, more consumers are qualifying for credit cards so that they can buy now and pay the bill later. Shoppers in a growing number of nations can set up electronic wallets that enable them to easily make purchases online. Consumers in the Netherlands can sign up for the MiniTix electronic wallet and then just click to have the amount of any purchase electronically transferred to an online retailer. Different people view money different ways and according to their cultural views. Some will spend to buy what they want now whereas others will engage in self denial to save. One study showed that spenders tend to be happier and healthier than self deniers who are often unhappy about finances, personal growth. Overtime those who consistently spend more and more will find themselves deeply in debt and may even declare bankruptcy (Hoyer&Maccinis 2008, p.337).

2.4.3 Social Factors

Consumer behavior is also affected by social factors such as reference group, family and role and status (Kotler 1999, p.235).

The table below illustrates the Social factors of consumer behavior:

2.4.3.1 Reference Group

Reference group was defined in a Management Article in 2009 as an actual or imaginary individual or group conceived of having significance relevance upon an individual’s evaluations, aspirations or behavior. Hoyer & Maccinis (1999, p.392) described reference group as a set of people with whom individuals compare themselves for guidance in developing their own attitudes, knowledge and behavior.

Moreover, it has been mentioned that reference groups influence purchasing behavior through:

Socialization,

Process by which individuals acquire the skills,

Knowledge,

Values,

Attitudes that is relevant for functioning in a given domain.

The reference group influences the person by exposing him to new behaviors and lifestyles and also the attitudes and self concept as he wants to ‘fit in’ plastic cards (Kotler 1999, p.235).

2.4.3.2 Family

Frequently, purchasing behaviour is influence by the family members and it makes up the family of orientation. Parents provide his family with an orientation towards religion, politics, economies, self-worth and love. The buyer’s family has a more direct influence on everyday buying behavior.

Husband and wife involvement varies widely by product category and by stage in the buying process. Kotler stated that the wife is the main purchasing agent for the family especially in the areas of food, household products and clothing whereas the husband may be the one contributing for the purchases made by the wife by working in his firm or company and having the availability of money. In this case, a credit card might seem more convenient to the wife as she is making all the major purchases than to the husband who did not have much to do with household expenditures.

While living in a family, often a consumer buys products for his whole family rather than for himself. For instance, the husband may decide to take up a credit card but his wife may also use it for the household expenditure (Kotler 1999, p.236). It would have been different if the person did not have a family in terms of the purchasing expenditure. A single man buying habits is far more different as compared to a married man purchasing expenditure. Hence, the need for plastic money is totally indifferent for both men single and married.

2.4.3.3 Role & Status

A single person can have many attributes and belongs to many groups such as family, clubs, and organizations. His position in each group is defined in terms of his role and status (Kotler 1999, p.238). Furthermore, he stated that a role is defiened with respect to the activities that he is expected to do according to the persons around them. Hoyer & Maccinis (1999, p.349) described that in a multi person household, members may perform a variety of roles in acquiring or consuming a product.

Each role can be performed by different household members or by a single individual and are indifferent in all situations, subset of individuals, or the entire household. For example in deciding which plastic cards to take, parents might make the final decision, but the children may play a role directly by stating their choices or indirectly where parents took into account their choices in mind. Parents may obtain the card but the entire family may use it. Parents are often the deciders and purchasers of items consumed by their children. Kotler (1999, p.238) mentioned that each role carries a condition reflecting the general esteem given to it by society. For instance, the role of a manager has more status in the society than the role of a son. Being a manager, the person will take up a different plastic card reflecting his status rather than a simple debit card for simple family purposes.

2.4.4 Personal factors

Kotler (1999, p.238) stated that purchasing decisions are also affected by the presence of personal characteristics such as age, lifestyle, occupation, income and personality.

The table below illustrates the Personal factors of consumer behavior:

2.4.4.1 Age and Lifecycle

The time span of life and passage of time have always been an important issue when regarding the purchasing behavior. Obviously, the tastes of consumers change when age and life cycle is mattered and so the purchase of goods and services as well changes. Family life-cycle consists of different stages such young singles, married couples, unmarried couples and oldies which help marketers to develop appropriate products for each stage (Shah, 2010). The Federal Reserve’s Survey of Consumer Finance 2007 showed that debit card use steadily declines with age and on the contrary, the use of credit card rises through the life course to a peak at middle age and does not decline until cardholders reach 75 years of age. Banks often try to define their market in terms of lifecycle stage and develop appropriate products (Kotler 1999, p.238). It may be possible for married persons to have more debit or credit cards than single persons.

2.4.4.2 Income

Since, the evolution towards a cashless society and plastic money, Banks observed closely the trends in personal income, savings and interest rates to redefine and design the products that they offer. Kotler (1999, p.240) mentioned that a person’s economic situation will affect his choice of products. A person might decide to take up a credit card with respect to his disposable income, savings or borrowing power. Fogel & Schneider (2011) stated in their article that college students’ attitudes toward debt are not the only factor that influences their credit card use but also the income, whether their own or their parents, can also influence their credit card use. Higher income students are more likely to purchase clothes, entertainment, and gasoline with a credit card.

2.4.4.3 Personality

Personality has always been an issue and it influenced the buying habits as analyse by the marketers. Kotler (1999, p.243) has defined personality as the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Schiffman and Kanuk (2008, p.420) provide personality as that the unique dynamic organisation of characteristics of a particular person, physical and psychological, which influence behavior and responses to the social and physical environment. Moreover, nowadays marketers are referring to people personality traits so as to make an effective advertising for their products. Therefore, a jovial and active person will tend to own a plastic card with unlimited or maximum credit limit that can give him the greater choice for his needs and wants.

2.4.5 Psychological Factors

The psychological core and it covers motivations, perceptions, beliefs and attitudes (Hoyer & Maccinis 1999, p.349). Furthermore, it helps consumers to make decision, have some sources of knowledge and information.

The table below illustrates the Psychological factors of consumer behavior:

2.4.5.1 Motivations

Basically, an influential approach to motivation was developed and derived by Maslow. Maslow derived that the different needs in order of importance are physiological needs, safety needs, social needs, esteem needs and self actualization. Furthermore, Kotler (1999, p.245) said that a person can have different needs at a given time. Some might be biological such as hunger, thirst and other might be psychological arising from the need for recognition, esteem or belonging. A need becomes a motive when it is aroused to a sufficient level of intensity. Schiffman (2002) defined motivation as the driving force within individuals that impels them to action.

Marketers look for these motivations in their customers so as to make them buy their products and successfully leverage these needs.

2.4.5.2 Perception

Kotler (1999, p.247) said that two people with the same motivation and in the same situation may react differently because of the way they think and perceived things. There are of two schools of thought and to add up, a person might perceive his plastic card as reliable and unlimited spending whereas the other might consider the same plastic card as time-saving payment system and to avoid long queue. Then, Marco Erlenkamp (2004, p.4) defined perception as gathering information through our senses, which are seeing, hearing, touching, tasting, smelling and sensing. Through these senses we can perceive things, events or relations. But as there are so many different stimuli only a small portion of them are noticed and an even smaller amount can really reach the attention.

2.4.5.3 Beliefs & Attitude

Consumers’ belief and attitude is different and will always be different because the theory of perception defines people with different school of thoughts. Therefore, marketers take these theories and concept to define and design their products and as such beliefs and attitudes make up brand image and affect purchasing behavior. Marketers can change the beliefs and attitudes by launching special campaign in this regard (Shah, 2010).

Kotler (1999, p.249) described belief as a thought that someone has over something whereas attitude is a person’s inconsistently favorable, evaluation or feeling towards an object. Hence, in a survey carried by Thomas A Durkin (2000), based on consumer attitudes towards credit cards at University of Michigan, both people who use plastic cards and those who did not were surveyed so that their attitudes could be tracked over time. Their overall opinions were somewhat more negative and polarized in 2000 than they were a generation ago. Opinions among all families that credit card use is ‘‘good’’ register a bit higher in 2000 (33 percent) than in 1970 (28 percent) but a bit lower than in 1977 (39 percent). The view that card use is ‘‘bad’’ is stronger in 2000 than in either of the earlier years. Views among holders of bank type cards were more favorable than those among the population generally. Nonetheless, unfavorable views among cardholders have increased over the decades; negative attitudes among cardholders are much more common in 2000 (42 percent) than they were in 1977 (14 percent). This finding is interesting but useful because card use is also much greater in 2000. In 2000, holders of bank-type cards are about equally divided in their opinions that credit card use is good or bad, much different from 1977, when a considerably larger proportion had a favorable opinion.