#cognitive effort

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Used a picker wheel to narrow down dinner choices and man if that isn't the most helpful thing

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THE FUTURE OF CHARITABLE GIVING: OVERCOMING THE PAIN OF PAYING

Maddie Croucher Behavioural Researcher at Ogilvy Change 

The second in a series of posts about The Future of Charitable Giving. A series uncovering new directions and the latest innovations in the 3rd sector.

We make thousands of monetary transactions every year – but what influences whether we make a purchase or decide to gift money to those in need? While many things motivate us to spend, certain barriers also stand in our way. The ‘pain of paying’ and the act of paying being cognitively effortful are two psychological barriers that have been shown to influence our spending behaviour. As we look to the future of charitable giving we need to use innovative technologies to make the process of donating psychologically easier for people.

Traditional economic theory considers the act of paying a purely rational and unemotional act. However, in 1996 Zellermayer brought to light the emotional aspects of the transaction and introduced the notion of “the pain of paying”, the idea that we experience direct and immediate displeasure when we pay for something.

Several studies since have provided support for this notion.

Raghubir and Srivastava (2008) revealed that consumers spend more money when paying with gift cards compared to cash; a behaviour attributed to the decreased transparency and tangibility of non-cash payments, which shields our visibility to the depletion of our resources.

Thomas, Desai and Seenivasan (2010) also showed that consumers who made purchases on a debit/credit card were more likely to spend more money on impulse purchases than those who spent in cash. Furthermore, consumers who had greater control over their spending habits, were more likely to falter when using their credit cards, suggesting that our desire to avoid the pain of paying can affect even the most scrupulous of us!

More recently, neuroimaging has provided direct evidence of the pain of paying. In a working paper, authors Nina Mazar, Hilke Plassmann, Nicole Robitaille, and Axel Lindner write that “Our findings support and extend recent behavioral economic theories of purchases by providing more direct evidence for the existence of a negative hedonic experience of paying and qualifying the displeasure as an affective pain. More specifically, Experiment 1 revealed that paying with money indeed recruits pain-processing brain regions but only those pain pathways that are involved in higher-order, affective aspects of pain processing and not in lower-order, somatosensory aspects.” This suggests that the ‘pain’ we feel when paying is emotional opposed to physical.  

As charities become increasingly aware of this psychological pain of paying and consider the future of spending in a cashless society they seek new technologies to overcome the barriers it presents to donors.

Paving the way is Barclaycard, with its new trial of contactless donation boxes. 

In September 2016, eleven national charities, including NSPCC and RNLI, were equipped with lightweight portable donation boxes that accept both chip and pin and contactless payments. The donation boxes comprise of a card reader, a branded hand held box, and a payment acceptance app which charities can designate a fixed donation amount to collect each time a donor taps. The app also allows for this amount to be changed quickly and easily for one-time transactions. For those who want to donate beyond the £30 contactless limit, a chip and pin function is also offered.

Barclaycard reports suggest that charities may be missing out on a massive £80 million in donations every year by only accepting cash donations, with Brits carrying less cash year on year and 50% making contactless payments on a monthly basis.

During its short 3 month trial Barclaycard’s new donations boxes collected more than £20,000 in donations, with some charities noticing so much success that they’ve continued to use the new system beyond its trial. The contactless donation boxes have also received positive praise from the public for their ease and flexibility.

With these contactless donation boxes overcoming many of the psychological barriers to charitable giving, we hope to see more charities adopt these new technologies in the future.

Interested in other ways charities are embracing technology to engage donors? Look out for the next post in The Future of Charitable Giving series where the latest innovations in the sector will be unveiled.

Zellermayer, O. (1996). The Pain of Paying. Ph.D. Disserttion, Carnegie Mellon University.

Raghubir, P. & Srivastava, J. (2008). Monopoly money: the effect of payment coupling and form on spending behavior. J Exp Psychol Appl., 14(3):213-25.

Pain of Paying? — A Metaphor Gone Literal: Evidence from Neural and Behavioral Science. INSEAD Working Paper No. 2017/06/MKT by Nina Mazar, Hilke Plassmann, Nicole Robitaille and Axel Lindner.

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“[S]peakers tend to gesture more when the task becomes difficult. They appear to do so, not merely as a reflection of the cognitive effort they are expending, but as a way to reduce that effort. Giving an explanation while gesturing actually takes less cognitive effort than giving an explanation without gesturing. In addition, gesturing reduces cognitive load, not by shifting the load to a store that is not involved in the task at hand, but by actually lightening the load itself.” [Susan Goldin-Meadow, Hearing Gesture, Belknap Press, 2003; 166]