Post on 17-Dec-2015
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(Hidden) fees for card payments:
Would transparency change consumer behaviour?
Elke HimmelsbachNico A. Siegel
30 September 2013 – Applying Behavioural Insights to Policy-Making – EC Conference, Brussels
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Policy Objectives of the European Commission
More transparency
of payment charges
Changing behaviour of consumers
More price competition
Lower charges for consumers
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Research Objectives
Explore consumers´ decision process:
A. Identify the main individual biases and external barriers
B. Identify the most effective policy options
… that prevent/drive cost-conscious payment choices from a
consumer perspective
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Mapping the Payers´ Decision Process
ACCESS ASSESSING & ANALYSING ACTING (or not)
Awareness Intention Behaviour Beliefs & Attitudes
7
Cultural norms & national legislation
Individual resources available Overconfidence bias Indiv. habits/status quo bias Context/Choice architecture
Low relevance of cost savings High preferences for
convenience, security Information overload Loss aversion bias
Push/Provision:No (easy) access
Pull/Attention: Low issue salience
BEHAVIORAL THEORY: Potential biases and barriers
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Choice architectureInformation based measures
Tested Policy Options
8
Education
Did you know
…?
Same price- X%
/€
rebate
+ X%
/€
surcharge
Merchant cost
information
FYI: merchant
costs are …
Cost differentiation
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Experimental design:Store types and payment scenarios
Offline
€ 20
Online
€ 20
Offline
€ 200
Online
€ 200
Payment options (if owned)Payment options (if owned)
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30 Treatment splits + 1 control group Covering all relevant stimuli combinations
Education Merchant cost
information
Payment costs
not included
Payment costs
included
Yes or no Yes or no Surcharge Rebate No rebate
The overall sample of 10 041 respondents across 10 EU countries allowed for robust sample base per split (n=324).
Did you know
…?
Same price
- X%/€
rebate
+ X%
/€
surcharge
FYI: merchant
costs are …
Timings of information given:
Before first entrance
At entrance and at the till
Only at the till
At the till and on the receipt
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Example/Extract of experimental design
© TNS Infratest 2013
This store will accept several payment methods:
All the prices displayed include VAT and payment charges.
If you pay cash, a 2% rebate will be applied to your bill. If you pay by debit card, a 1% rebate will be applied.
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Example/Extract of experimental design
That will be 200 €.How would you like to pay?
>>
Payment conditions: 2% rebate 1% rebate no rebateTotal amount to be paid: 196.00 € 198.00 € 200.00 €
I would walk to nearest ATM and
then pay with cash.
I am collecting reward points.
© TNS Infratest 2013
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Example/Extract of experimental design
© TNS Infratest 2013
Here is your receipt.
>>
Thank you for your purchase!
Total incl. VAT (in €): 200.00Payment charge:Rebate for Debit Card - 2.00Final total incl. VAT (in €): 198.00
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Which policy options were most effective in driving cost-conscious consumer choices?
0.074 0.143
0.632
1.255
0.012 0.206
1.203
1.739
Education
Did you know
…?
Extract of results based on logistic regression analysis to identify statistically significant drivers of cost-conscious choices. Values display strength of regression coefficients. Base: EU10 (without missing variables) – offline scenario (n = 8018) – online scenario (n = 7490)
Not significant
--
On-line
Off-line
Strongly significant *** (p < 0.001)
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Rebates
- X%/€
rebate
Surcharges+ X%
/€
surchargeMerchant cost
information
FYI: merchant
costs are …
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Which behavioural biases were identified?Loss aversion & Overconfidence
A. STATED PREFERENCES: Should you face surcharges (…), do you intend to - Refuse to shop in this store 25%
B. OBSERVED BEHAVIOUR:Always made cost-efficient choices …- In the offline shopping scenarios 30%
Base: EU10 – all respondents (n = 10 041)
+ X%
/€
surcharge
Overconfidence bias (A-B): 24%-points
- Generally use a cheaper payment method and avoid surcharges 54%
- Generally pay the surcharge 6%- Only avoid the surcharge when spending a higher amount 10%- Don´t know 6%
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Which behavioural biases were identified?Status quo bias
Extract of results based on logistic regression analysis to identify statistically significant habitual drivers (Q12/13) of cash choices in the offline shopping scenarios. Values display strength of regression coefficients. Base: EU10 (without missing variables) n = 8 018
More frequent cash
payments
B: .274 ***
Habits driving cash choices
Less frequent offline
shopping
B: .190 **
Less frequentcredit card usage
B: .177 ***
High amount of cash in wallet
B: .250 ***
Less frequent
debit card
usage
B: .203 ***
Less frequentmobile
payments
B: .088 **
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Drivers of cost-conscious choices in offline scenario
42%R2:
0.0
0.5
1.0
1.5
2.0
2.5 Policy options Motives & goals Habits Socio-demogr.
Extract of results based on logistic regression analysis to identify statistically significant drivers of cash choices in the offline shopping scenarios. The model explains 42% of the variance. Only variables with strong significance *** (p < 0.001) are displayed. Base: EU10 (without missing variables) n = 8 018
Low
pu
rch
ase
valu
e
Countr
y e
ffect
s
Young
er
age
Hig
h c
ost
rele
vance
Low
con
ven
ience
rele
vance
Hig
h b
udget
con
trol re
levance
Hig
h c
ash
fre
quency
Low
debit
card
usa
ge
Low
cre
dit
card
usa
ge
Hig
h c
ash
am
ou
nt
in w
alle
t
Su
rcharg
e
Rebate
Tim
ings
(cost
info
)
Ed
uca
tion
Context matters!Reg. coeff.
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Summary of Policy Implications IInformation based measures
Did you know
…? Payment choice is highly habitualised with low consumer attention.
Simple notifications do not change consumer behaviour.
Education treatment has strong impact within lab testing. Further evidence required whether impact visible in real life.
Consumers change behaviour only if cost differences are made relevant to them directly in form of rebates or surcharges.
FYI: merchant
costs are …
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Summary of Policy Implications IIDirect regulatory measures
- X%/€
rebate
Rebate
+ X%
/€
surcharge
Surcharge
Does not drive issue salience.
Provides a positive framing and is more accepted.
Is less effective than surcharges in driving cost-conscious choices.
Is most effective in driving cost-conscious choices.
Drives issue salience.
Provides a negative framing and is less accepted.