Festive shoppers in the UAE could rack up “unprecedented” debt next year due to increased use of contactless payments, according to a report by London Business School (LBS).
Terming it as a “powerful anaesthetic”, touchless and mobile payment options are now more widely available than ever, said Niro Sivanathan, associate professor of organisational behaviour at LBS. He added that paying for goods with a credit card “decouples the pleasure of consumption from the pain of paying”.
“Parting with cash is psychologically painful,” said Sivanathan. “Consumers are therefore less likely to spend as much when cash is the only payment option available.
“Paying with contactless payment facilities further reduces the friction and anaesthetises the psychological pain that accompanies payment, seducing us into splashing out even more on those pricey purchases,” he added.
Sivanathan warned consumers face a “bigger risk of a holiday season financial debt” as they are “willing to pay more for goods” at that time of year.
The report also found that purchasing luxury goods on credit was especially attractive to those who have low self-esteem.
“These individuals seek to boost their self-esteem by purchasing high-status goods to make them feel better about themselves. The combined effect of low self-esteem, high status goods and the ability to purchase on credit creates a ‘perfect storm’,” Sivanathan said.
He said this can be dangerous for such consumers, who face a higher risk of falling into debt.
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