“Tap, scan the QR code and payment is successful’’ has become a very familiar phenomenon to many Indians, especially in the urban area. The ease, convenience and frictionless privilege to access one’s funds without using a card or cash make it extremely easy to buy anything in both offline and online modes. Smartphones, increasing digitization and internet access, an abundance of technology, the demonetization move of GOI and the recent pandemic all acted as a catalyst for the adoption of mobile wallets in India. A recent survey reveals that the Indian mobile wallet market is flourishing at a CAGR of 46.3% and the earning revenue through the mobile wallet is estimated to reach $429.2 billion by 2027 (4).

Restricted movement during the pandemic, working from home and the emergence of e-commerce influenced the growth of the mobile wallet market and many unwilling citizens also began to use a mobile wallet. The growing awareness among consumers is another reason for the exponential spike in cash-less, card-less Mobile wallet transactions. The government of India has introduced a variety of mobile payment options- namely UPI, Aadhaar pay, and BHIM to accelerate the cashless economy. But often mobile wallets are blamed for causing consumers to spend more than if the purchaser had used cash or cards. Earlier, consumers used to shop by using the cash from their wallets and pay their bills but often found hassle in getting exact change. Cash pay though is inconvenient but at the same time, shoppers get multiple reminders that money is being spent and often used to manage their budget more efficiently.

Later purchases through swiping plastic cards made transactions easier and plastic cards are blamed for causing customers to spend more. Research states that mobile payment encourages overspending as the budget becomes less salient. There is a need to understand spending behaviour and this article has studied the effect of mobile wallet usage on consumers’ spending behaviour.

What is a mobile wallet?
A mobile wallet is a digital substitute for a physical wallet where one can preload a certain amount of money linked to his/her bank account or credit/debit card and it can be used to make any online and offline payment.

The mobile wallet provides a secured transaction option between consumer to consumer, consumer to business, consumer to machine and consumer to online (2). It is an extension of mobile banking and mobile money. The personal and other required payment information for mobile transactions is stored digitally in the device. Consumers don’t need to carry cash or a card while going shopping and mobile wallets can make the payment to any payment terminal with near-field communication (NFC) technology. Mobile wallets are accessible from any play store or app store. The most popular mobile wallets in India are Google pay, Phonepe, Paytm, Mobikwik, Amazon Pay, Bhim etc. They are used for shopping, travelling, bill payment, money transfer and fund transfer, from anything like buying a cup of coffee to online ticket booking.

Overspending behaviour while using a mobile wallet

Cashless and contactless payment and money transfer using Smartphones have become the new normal and the transaction and purchasing process is revolutionized. But as many researchers have pointed out that often people using mobile wallets are more likely to overspend. A study claims that people of the same annual income spend 34% higher while using mobile wallets than those who used other payment methods. There are multiple reasons identified by the researchers for this overspending behaviour of people using mobile wallets—

• Convenience & Flexibility-Consumers can transact online and offline seamlessly with time and space flexibility and the ubiquity of cash is offered by Mobile wallets. Convenience leads to impulse purchases and the extreme flexibility of paying through smart phones often influences overspending.
• Safety and Security- Mobile wallets are protected by multiple screening processes like biometric screening, iris recognition, fingerprint recognition, facial recognition and password number keys. Since no account number is required in the transaction, the chance of remote hacking is less. Therefore, customers feel more secure while using this payment method. The high level of trust created by mobile wallets in handling the private data of consumers has a direct impact on the adoption of this technology platform.
• Loyalty programs and promotions- Consumers get many promotional offers and instant rewards and can accumulate points to get loyalty benefits for using mobile wallets and these lead shoppers to spend more frivolously.
• Less tracking and less painful consumption- A concept called ‘Coupling’ (Drazen Prelec and George Loewenstein) states that consumers experience more pain if the payment and the consumption happen at the same time as consumers can track the expenses more closely. For example, people don’t enjoy taxi rides in case the taxi meter clicks continuously but the same ride can be more peaceful in the case of a prepaid taxi or pay through digital wallets. The ‘Coupling’ effect is weak in the case of mobile wallet payments and the immediate sense of pain is less due to the absence of immediate tracking of expenditures. Eventually, people spend more while shopping through mobile wallets.
• Lifestyle compatibility, Perceived ease of use, usefulness and facilitating conditions provided by mobile wallets are a few other reasons identified by researchers that lead to overspending (1).

Mobile wallet is added as another digital payment avenue and allows people to shop or transfer money at any time and any place. It creates a convenient shopping experience, makes any purchase or checkout easier and helps consumers to manage their finances efficiently. But consumers should think about how to use them, how many items to buy, whether any item is worth purchasing and how to control the shopping spree. For overspending, we should be blamed not the mobile wallet.