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Online Payment Methods and Spending Behavior

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28 views8 pages

Online Payment Methods and Spending Behavior

Uploaded by

jajalarawan
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

CHAPTER 2

REVIEW OF RELATED LITERATURE

This chapter presents the additional idea for the better understanding of the

researchers as for as the topic of the study is concerned and as well as guide them in the

procedural conduct of the study. This chapter also contains synthesis of related literature

and studies.

Online Payment Methods

Online payment methods refer to the electronic exchange of currency through the

internet. It encompasses all technical and non-technical processes used to enable such

transfers. Online payment systems offer a range of benefits to both businesses and

consumers, including a streamlined shopping experience, keeping payment information

secure, organizing purchases and cashless transactions, and more. (Sari, 2020). Online

payment methods can be categorized into three categories: bank cards, electronic wallets,

and payment gateways. Bank cards include credit and debit cards, while e-wallets include

mobile payment apps like Apple Pay and Google Pay. Payment gateways are services that

process payment information on e-commerce websites.

Online payment methods have become increasingly popular among consumers and

businesses, providing a convenient, quick, and secure method for conducting payments.

Online payment processing services streamline online shopping experiences, giving users a

positive experience and helping businesses earn more sales. Online payment methods allow

the transfer of funds from one party to another, typically through a secure and digital

medium. This transfer can occur within seconds or minutes, providing a convenient and

efficient way to exchange money.

According to Nagasubramanian and Rajagopalan (2022),

online payment is the fastest and secured way of making payments for

various purposes like making utility payments, transferring funds and making

purchases online. As nowadays almost all items can be purchased online by


making payment online. Users in fact can view the things either as a picture

or video and can make decisions very quickly. They also have the luxury of

making a purchase anywhere in the world and getting it delivered right into

the place of their choice in a short time. On the other hand, this will make the

life of the customers easy and will allow them to make payment in the most

flexible way that is made possible by this suggestion. This will definitely

increase the volume and frequency of transactions as customers are

encouraged to do things in the most flexible way they want to.

Accepting online payment for goods or services helps businesses reach a wider

audience and keep the customer experience running smoothly. Online payment systems

often employ advanced security measures to protect customer information. It offers a

seamless and user-friendly interface for customers to complete transactions with features

like saved payment information, one-click purchases, and automated recurring billing

options.

A study conducted by Coskun et. al (2022) in Turkey, they found out that consumers

prefer digital payment methods over cash, citing convenience, speed, and security as the

main reasons. Financial technology is now widely used in a variety of applications, the most

prominent of which are online payment systems. Due to technological advances, the process

of transitioning from cash to card payments and then from card payments to online

payments has accelerated. According to the findings, the first factor is a multidimensional

factor that includes relative advantage, compatibility, quality of internet connection, ubiquity,

perceived enjoyment and facilitating conditions. The fact that users can conduct transactions

whenever and wherever they want will encourage them to make online payments as relative

advantage has a positive impact on their attitude and behavioral intention.

A research by Stiltner (2021), among the different online payment methods existing

and available in the Philippines, GCash is the most used as 81.33% of the respondents use

GCash as their preferred online payment method, while only 3.33% use PayMaya. The study

also revealed that GCash is the top mobile wallet used by Filipinos for cashless transactions,
with 4.9 million out of 6.4 million mobile wallet emitters in the Philippines using GCash. Its

popularity can be attributed to its convenience, accessibility, security, variety of payment

options, cost-effectiveness, contactless payment options, rewards and loyalty programs, and

user-friendly interface. GCash offers a wide range of services, including paying bills, making

bank transfers, sending money, investing money, booking movies, withdrawing, and buying

load. It is also accessible to a diverse range of users, including different demographics,

making it a popular choice among Filipinos.

Moreover, to Buenviaje et. al (2022) majority of their respondents trusted online

payment method (GCash) instead (Paymaya) as very useful and easy to manage. The study

found that most of the respondents in Cavite particularly lives in Bacoor, Dasmarinas and

Imus are users of Gcash and Paymaya for their food purchase. As online payment methods

are an accessible application or platform in today’s generation, it is an effective and essential

tool, mostly it is used for purchase food, coupons for discounts and promos, avoid contact in

person and other benefits regarding of usefulness, ease of use, security, and compatibility.

Furthermore, GCash plays a role in promoting financial inclusion by offering digital

financial services to people who may not have access to traditional banking services. It also

offers rewards and loyalty programs that incentivize users to use the platform for their

transactions. GCash has a user-friendly interface that is easy to use, making it accessible to

users who are not born in the digital age. Due to this, the platform has evolved into a

comprehensive digital wallet that meets various financial needs for Filipinos, from daily

transactions to savings and investments. GCash's popularity can be attributed to its ability to

meet the needs of Filipinos, because of its convenience, widespread acceptance, and the

range of financial services it offers, all within a user-friendly mobile software as they use in

spending their money.

According to Liu et. al (2020),

online payment methods can have a significant impact on consumer behavior,

including spending behavior. Mobile payment methods, in particular, have

been found to influence consumer behavior by increasing convenience,


reducing perceived risk, enhancing trust, and increasing pleasure of paying.

Online payment methods can increase convenience, reduce perceived risk,

and enhance trust, which may lead to overspending. The use of credit card

payments and online banking are also associated with higher spending levels

than the use of cash.

Spending Behavior

Spending behavior refers to how individuals use their money regularly and almost

automatically. It is a complex phenomenon that is influenced by various factors, including

personal values, attitudes, beliefs, and emotions. Spending behavior can be categorized into

different types, such as impulsive spending, planned spending, and compulsive spending.

Understanding spending behavior is essential for individuals to manage their finances

effectively and make informed financial decisions.

Online payment methods can have both positive and negative effects on spending

behavior. While they offer convenience and ease of use, they can also lead to increased

spending levels, especially for consumers with low financial knowledge. Understanding the

impact of online payment methods on spending behavior is essential for individuals to make

informed financial decisions and manage their finances effectively.

Moreover, Mathias and Shaji (2021) who investigated the preference patterns of

university students from South Bangalore for digital payment methods over cash, found that

students prefer online payment methods as they are more convenient and secure that could

lead them to spend more. Online payment methods offer a convenient way to make

purchases, which can lead to increased spending, it can lead to increased spending levels

and impulsive buying behavior. Moreover, the ease of use with this different online payment

methods reduces the friction involved in making a purchase, making it more tempting to buy

on a whim. Furthermore, with online payments, consumers can receive your purchased

items or services instantly or within a very short time frame. This instant gratification can

trigger impulsive buying decisions, as people often seek immediate rewards. They tend to

make impulsive purchases and encouraged to spend more.


Another related study conducted by Jiang (2022), the study examined the effect of

payment method (cash vs. online payment) on spending behavior. The research found that

consumers tend to spend more when using online payment methods. The findings shows

that there are implications both for consumers, merchants, and policymakers. For

consumers, if they worry about the overspending problem, switching the payment method to

cash may significantly reduce their elastic consumption. For merchants, encouraging mobile

payment is profitable. It can increase both purchasing amount and average spending of

consumers. For the policymakers, the new technology development is beneficial for

stimulating domestic demand. It also can be used as a nudge to foster public services. For

the countries which the mobile payment is not so popular at now, the adoption of mobile

payment is a potential economic engine. On the hand, it should be careful of the goods that

are addictive or correlated to the overspending problem, the regulations of payment may be

needed to increase consumers’ financial awareness.

According to Bandi et. al (2019),

consumers who switch to digital payments due to exogenous reasons tend to

buy more expensive items, more items per basket, place higher-valued

orders, and return items less often. Online payments are typically made with

digital money, which doesn't have the same tangible feel as physical cash.

This detachment from physical currency can make it easier for individuals to

spend more, as they don't have a clear sense of money leaving their wallet

and spend it all whenever they want.

Another study by Ghaith (2022), the research found that e-payment systems have a

significantly favorable effect on customer behavior. Electronic payment has a tremendous

impact on that payment experience since it provides security, decreases risk, as well as

lowers the cost of payment; all of which contributes to a better customer experience. It is

also found out that the main expected advantage of e-payment systems in Jordanian is its

capacity to lower transaction costs by eliminating the danger of carrying cash around. This
implies that the usage of physical currency, which has fostered crimes involving the use of

cash, such as armed robberies and burglaries, would be drastically reduced.

A research by Chang et. al (2022), who investigated the impact of mobile payment on

consumer behavior by proposing and testing a pleasure of paying model. The research

found that mobile payment can increase consumers' pleasure of paying, which may

influence their spending behavior. As online payment methods make the purchasing process

extremely convenient. With stored payment information and one-click checkout options,

there is little friction in completing a transaction. This ease can lead people to make impulse

purchases because they don't have to go through the hassle of entering payment details.

They proposed that online payment not just reduces the “pain of paying,” a traditional view

explaining why cashless payment stimulates spending, but it also evokes the “pleasure of

paying,” raising from the enhanced processing fluency in completing transactions. Online

auctions can create an environment where users become emotionally invested in winning an

item, leading to higher bids, and spending more than intended.

Another related study by Karim (2020), the advancement of financial technology has

led to a noticeable rise in the number of cashless transactions in recent years. Consumers

are moving away from cash-based transactions to cashless ones as a result of the

expansion of fintech products like the e-wallet. Given that they were raised in the

smartphone era, young adults are seen as tech-savvy consumers in the twenty-first century.

By using the extended technology acceptance model (TAM), this study aims to investigate

the factors that Malaysian young adults consider when choosing an e-wallet as a payment

option. Partial least squares structural equation modelling (PLS-SEM) was used to analyse

330 data points that were gathered from e-wallet users in the Malaysian Klang Valley. The

results from this study show that perceived usefulness, perceived ease of use, and privacy

and security have a positive and significant relationship with behavioural intention to use an

e-wallet. This study assists the service providers of the digital marketplace further to have a

better understanding of the usefulness of e-wallets.


A study on the variables influencing customer decision-making on online payment

methods was undertaken by Thi Phuong Linh NGUYEN (2020), the research found out the

factors such as perceived behavioural control and perceptions of utility, risk, trust, and

simplicity of use all have an impact on how people use online payment options. The largest

influences on decision-making for online payment methods are positive for knowledge of

usefulness and negative for awareness of danger, respectively. The article makes a number

of recommendations based on these significant findings, including (i) continuing to invest in

and upgrade modern technology to ensure customer information is completely private; (ii)

switching all ATM cards currently in use to EMV chip standard card technology; (iii)

improving customer service activities and handling issues quickly to boost customer

confidence; and (iv) credit institutions working in the online payment sector linked to e-

commerce websites, supermarkets, and other businesses that accept credit cards.

According to Listiyino (2023),

there is a significant positive relationship between students' intention to use

the university's e-wallet and their perceptions of convenience, usefulness,

and trust. The empirical findings demonstrated a significant positive

relationship between perceived usefulness, perceived convenience, and trust,

and students' intentions to use online payment methods. Additionally, it was

discovered that perceived convenience significantly and favourably affected

how useful students thought online payment was. Its convenience, security,

and adaptability have made them an integral part of modern commerce and

finance. Online payment methods are designed for ease of use and

convenience. They eliminate the need for physical visits to banks or payment

centers, allowing individuals to make payments or transfer money from the

comfort of their homes or anywhere with an internet connection. It come in

various forms, including credit and debit card payments, bank transfers,

digital wallets, and peer-to-peer payment apps. This versatility provides users

with multiple options for making payments or purchases. Additionally, A key


aspect of online payment methods is security. These methods employ

encryption and various security measures to protect financial data and

prevent unauthorized access, ensuring that sensitive information remains

confidential.

Another related study conducted by Abbas et. al (2021), the study found out that

online payment methods continue to spread rapidly, gaining more importance. It is a

theoretically supported model with empirical underpinnings designed to explain why people

accept technology or information systems, and it has two key components: perceived

usefulness and perceived usability as it affects the switching behaviour actual use,

continuous use, recommended intention, and satisfaction of digital payment users.

Online payment methods have a global reach, allowing individuals and businesses to

engage in international transactions and trade. They can support multiple currencies and

offer currency conversion services. Moreover, many online payment methods are adapted

for mobile devices, enabling users to make payments via smartphones and tablets. This is

particularly convenient for on-the-go or contactless transactions. Online payment methods

have significantly transformed the way individuals and businesses conduct financial

transactions in the digital age. Its convenience, security, and adaptability have made users

an integral part of modern commerce and finance. Considering that several studies

discussed that online payment methods can make it easier for individuals to engage in

impulsive spending behavior, due to factors such as payment frequency, payment method,

and financial knowledge. Furthermore, the use of online payment methods in cashless

transaction is associated with higher spending levels compared to cash. Understanding the

impact of online payment methods on spending behavior is essential for individuals to make

informed financial decisions and manage their finances effective.

Common questions

Powered by AI

User experience and interface design play crucial roles in the adoption of digital payment systems by making these systems accessible and easy to use. A seamless, intuitive interface reduces the friction typically involved in financial transactions, thereby enhancing user satisfaction and encouraging repeat behavior . Features such as one-click purchases, stored payment information, and a simple layout increase convenience and encourage users to engage more frequently with the platform . The design must also ensure that users feel secure, incorporating clear and straightforward steps for verification and security checks, which builds trust and confidence in the system . User-centered designs that are responsive and scale across devices further improve adoption rates by ensuring consistent user experiences .

Online payment methods have significantly influenced consumer behavior by increasing convenience, reducing perceived risk, and enhancing trust, leading to higher spending levels. Mobile payment methods, in particular, offer convenience and speed of transactions, which can result in overspending due to reduced friction in making purchases and the pleasure of seamless payment . Consumers using online payments often experience impulsive buying behavior due to instant gratification and the lack of physical cash exchange, which psychologically detaches them from the real value of money . This can lead to financial challenges for individuals lacking financial knowledge . Additionally, these methods encourage merchants to promote higher spending, impacting broader financial decision-making .

Online payment methods mitigate risk and enhance security by employing encryption and various security measures to protect financial data and prevent unauthorized access . Features like two-factor authentication, tokenization, and fraud detection systems are commonly used to ensure secure transactions. Payment platforms also often offer buyer protection policies and services to handle disputes . By removing the need to carry and handle cash, online payments significantly reduce risks associated with theft or loss, contributing to a safer transaction environment . These methods provide a secure and convenient way to conduct financial transactions while ensuring confidentiality and protection of sensitive information .

The shift from cash-based transactions to digital transactions carries numerous economic and social implications. Economically, digital transactions enhance efficiency, reduce transaction costs, and open up opportunities for innovation and expansion in financial services, benefiting both consumers and businesses . They also enable more transparent and easily traceable financial activities, thereby potentially reducing illicit transactions . Socially, cashless transactions promote financial inclusion by providing services to those without traditional banking access, although they also raise concerns about privacy and data security . However, this shift can exacerbate the digital divide, as populations with limited access to technology could be marginalized . Policymakers need to consider these implications to ensure inclusive economic development and address potential inequalities in access and digital literacy .

Online payment methods offer significant economic benefits to merchants by increasing sales volumes, average transaction values, and broadening their customer base both locally and internationally . For policymakers, these methods stimulate domestic demand, potentially serving as economic engines in regions where mobile payments are not yet prevalent . However, they also present challenges, such as the need for regulatory frameworks to address financial safety and overspending risks . While facilitating economic growth, policymakers must balance encouraging the adoption of digital payments with consumer protection and awareness efforts to mitigate overconsumption and ensure financial literacy . Additionally, ensuring infrastructure readiness and cybersecurity measures constitutes a critical focal area for policymakers .

The evolution of financial technology is closely linked to the transition from cash to cashless transactions. Technological advances, including the development of e-wallets and online payment platforms, have facilitated a shift from cash-based transactions to card and subsequently online payments . The integration of digital payment methods, such as mobile apps and online banking, simplifies transactions, making them faster and more convenient. These technologies also enhance security, reducing the risk associated with physical cash handling . Additionally, the widespread adoption of smartphones and internet connectivity supports this transition, enabling consumers to engage in cashless transactions more frequently, contributing to the growing prevalence of cashless economies .

Online payment systems have a transformative impact on global reach and financial inclusivity by enabling individuals and businesses to participate in international transactions. They support multiple currencies and offer currency conversion services, facilitating trade and commerce across borders . Moreover, these systems often include features that promote financial inclusion, such as digital wallets accessible to users without traditional banking services, which is particularly beneficial in regions with limited banking infrastructure . Furthermore, their adaptability to mobile devices allows for remote and contactless transactions, increasing accessibility for diverse demographics .

Perceived usefulness, ease of use, and security significantly influence consumers' intentions to adopt online payment systems. When consumers find these systems useful, offering tangible benefits like convenience and efficiency, their intention to use them increases . Ease of use reduces barriers to engagement, making the system more accessible; intuitive interfaces and seamless user experiences enhance adoption likelihood . Security is paramount; consumers are more likely to adopt systems they trust to protect their financial information . Collectively, these factors build consumer confidence, facilitating the adoption of online payments as they balance convenience with security considerations in their financial activities .

The widespread adoption and consumer preference for e-wallets like GCash in markets such as the Philippines are influenced by several key factors. Convenience and accessibility are paramount, as GCash provides a user-friendly interface and a variety of payment options, including bill payments, money transfers, and investments, all accessible through a mobile app . Security features also enhance trust, with GCash being perceived as secure and cost-effective . Additionally, contactless payment options, rewards, and loyalty programs further incentivize its use. GCash's ability to cater to different demographics and its role in promoting financial inclusion by offering services to those without traditional banking access also contribute to its popularity .

Online payment methods can be categorized into three main categories: bank cards, electronic wallets, and payment gateways. Bank cards, such as credit and debit cards, are traditional methods that allow transactions to be carried out directly from a bank account or a line of credit. Electronic wallets, like Apple Pay and Google Pay, store users' payment information securely and enable faster checkout with features like contactless payments and rewards. Payment gateways process payment information for e-commerce websites, facilitating secure online transactions . These categories differ in the security measures they employ, the convenience they offer, and the speed of transaction processing, all contributing to enhanced consumer experiences .

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