Digital Payments and Households' Consumption: A Mental Accounting Interpretation. Issue 7 (28th May 2021)

• Record Type: Journal Article
• Authors: Hou, Liming; Hsueh, Shao-Chieh; Zhang, Shuoxun
• Is Part Of: Emerging markets finance & trade. Volume 57:Issue 7(2021)
• Page Start: 2079
• Page End: 2093
• Publication Date: 2021-05-28
• Subjects: Digital payment -- consumption -- mental accounting -- liquidity constraint; D1 -- D9 -- D12; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2021.1887727
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: We explain the stimulating effect of digital payments on households' consumption using mental accounting theory. With the China Household Finance Survey (CHFS) data in 2017, we empirically identify that households who use digital payments spend 20.63% more than those with alternative payment methods. From the mental accounting perspective, we argue that using digital payments increase consumers' transaction utility, facilitate intentional adjustment of mental accounts, and result in more unplanned consumption. The stimulating effect is more substantial on long-term consumption and among households with low self-control abilities. Moreover, the integrated financial services provide access to liquidity and help smooth consumption.