Thursday, January 15, 2004

Why we don't want direct fees for payments...

In todays Het Financieele Dagblad Henriƫtte Prast refers to a book by Gerrit Antonides with the title: 'Psychology in economics and business'.

She refers to the prospect-theory that explains that winning a lottery and earning 100 euro, followed by immediate payment of 80 euro feels different than winning a mere 20 euro in the lottery. Although rationally both situations are the same, emotionally, the first one is experienced as less pleasant.

Applied to payment systems, the theory explains that the fact that a separate fee payment needs to be made to pay for the cost of having a bank account (or getting a debit-card etc..) leads to stronger dissatisfaction than if the fee is indirectly paid.

Interesting enough, the above is something that practicioners could have told you years ago, while scientists were still working under assumptions of rational behaviour. At last, theory has adapted to reality.