  The introduction of new payment methods has resulted in one of the most
significant changes in the way we consume goods and services. In this paper, I
present results of a field and a laboratory experiment designed to determine
the effect of payment method (cash vs. mobile payment) on spending, and a
meta-analysis of previous literature about payment method effect. In the field
experiment, I collected cashier receipts from Chinese supermarkets. Compared to
cash payment, mobile payments significantly increased the amount purchased and
the average amount spent on each item. This effect was found to be particularly
large for high price elasticity goods. In the laboratory experiment,
participants were randomly assigned to one of four groups that varied with
respect to the kind of payment and the kind of incentives, eliminating the
potential endogeneity problem from the field experiment. I found that compared
to cash, mobile payments lead to a significantly higher willingness to pay
(WTP) for consumption. In contrast to others, I found that pain of paying does
not moderate the payment method effect; however, other psychological factors
were found to work as potential mechanisms for affecting WTP.
