Payment Behavior Dynamics Using Mental Accounting Theory: The Moderating Effect of Self-Control
Despite the burgeoning dominance of digital payments, there is a dearth of research exploring psychological factors that drive consumers to their excessive use as compared to conventional cash payments. This study fills the gap and examines the effect of different payment methods on consumer payment behavior through the lens of mental accounting theory. The study also introduces a moderation of self-control as a rational phenomenon that resists immediate temptations and avoids hasty payment decisions. Having a quantitative research design, the study collected primary data through structured questionnaires that were measured on a 7-point Likert scale. Using purposive sampling, the study collected relevant data from 391 respondents consisting of different demographics in Pakistan, including students, employees, and business professionals. The results of both the measurement and structural model were obtained via Structural Equation Modeling executed through Smart-Partial Least Squares. The key findings describe that both cash and digital payments have significant effects on payment behavior. The results further demonstrate the significant moderating role of self-control, strengthening the hypothesized relationship between payment methods and payment behavior. The findings contribute to the empirical research on mental accounting theory and add to behavioral finance literature by revealing how the different payment modes accelerate or slow down spending. The results also guide individuals, practitioners and institutions to enable self-control mechanisms that will help curb overspending.