As explained by behavioral experts, revelers might get a nasty New Year shock. Revelers across UAE are preparing to go into 2017 and analysts have warned them against spending with credit and debit cards.
Residents of UAE who prefers to swipe their cards have the tendency to spend more than the ones who use physical money and coins hence those who don’t leave their payment cards while they are out enjoying and celebrating can be in for some shock this new year. This research is from a professor of London Business School.
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Associate professor of organizational behavior, Niro Sivanathan advised that using cash instead of cards could keep festive spending under control.
Going without cash can be psychologically painful. Consumers are hence less likely to spend when cash is the only payment option left to them, says Sivanathan. Paying with credit card decouples the pleasure of consumption from the pain of paying.
For the revelers, UAE is not the only popular destination for New Year’s Eve. It is also the world’s one of the most expensive places to celebrate the special occasion. For example, a night party at a restaurant in Dubai, would easily cost the partygoer almost Dh2,240, which is much higher as compared to what one would spend in New York, London, Paris or Amsterdam, as per the Travelex research.
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Shoppers in the region tend to be less receptive to cashless transactions; however, the latest research shows that more number of people in the UAE is now indulging in the convenience of contactless payments.
According to the data disclosed by PwC, the growth of online shopping alone is now accelerating with a rapid pace, having the percentage of people buying over the internet on a daily basis has doubled from six per cent in 2014 to 12 per cent in 2015. The number is quite higher now than the global average, though the percentage of weekly and monthly shoppers is yet to pull up and still fall behind.
Regional consumers look for different items online, with clothing and footwear being the top priority, followed by electronics, computers, books and music being highly in demand.
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A separate study conducted by research of Morgan Stanley, it indicated that more than 34% which is a third of online shoppers are expected to purchase online groceries this year.
Sivanathan has warned that cashless transactions are a powerful anesthetic as they guard the consumers from the psychological pain that comes with spending money. The more a consumer gets detached, the more likely the spending goes up.
Payment with credit card guards the pleasure of satisfaction and consumption from the pain of payment. Contactless payment further results into reduction in the friction and anaesthetizes the psychological pain that accompanies payment, inducing the people more into splashing out than required pricey purchases.
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The risk of holiday season’s financial debt increases more when consumers decouple the pleasure of consumption from the psychological pain of expenditure. There are also worrying implications for some shoppers as purchasing luxury goods on credit is quite attractive to those having low self esteem.
These kinds of individuals look for boosting their self-esteem through purchasing high-status goods to make them feel better about themselves. The blending effect of low self-esteem with high status goods and the ability to purchase on credit creates a dangerous situation. Consumers with low self-esteem are at the stake and at higher risk of falling into debt.
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