Digital payments, such as mobile pay, have grown exponentially due to the financial technology revolution. In the present study, we examine the impact of mobile pay on overspending, measured by checking account overdrafts.
To examine the connection between mobile pay adoption and overspending, an ordinary least squares regression model was carried out on the 2018 and 2021 cohorts of data from the National Financial Capability Study (NFCS). Furthermore, we use the propensity score matching (PSM) and instrumental variable (IV) design to reduce potential endogeneity concerns.
Our analysis reveals that adopting mobile pay is associated with an increased likelihood of overspending, particularly evident before the pandemic in 2018. Furthermore, we observe a significant gender disparity in the connection between mobile pay and overspending. While male consumers are more likely to overspend with mobile pay, this connection is not statistically significant among female consumers. Our findings remain robust after accounting for the diverse financial backgrounds of respondents.
This study expands the “pain of paying” theoretical framework by uncovering gender differences and examining how economic downturns, such as the COVID-19 pandemic, may weaken the effect of digital payment methods on overspending behaviors. The study underscores the importance of adopting careful, mindful financial planning strategies when embracing new payment technologies, encouraging individuals to manage their finances effectively to mitigate the impact of spending habits.
