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Effect of Digital Payment Systems on Consumer Spending Behaviour
Subject area: Management and Commerce · Area of research: Digital Payments, Consumer Behavior
Abstract
Digital payments have transformed the way people in India purchase goods and manage their finances. Since demonetisation in 2016 and the introduction of UPI, digital payment methods—whether UPI, mobile wallets, cards, or net banking—have shifted from being a backup option to becoming the preferred mode of payment for most consumers. While digital payments are widely regarded as convenient and fast, a recurring question is whether this ease of transacting is also altering how much people actually spend. This paper examines the effect of digital payment systems on consumer spending behaviour, focusing on convenience, trust, cashback incentives, and the extent to which increased payment ease encourages unplanned purchases. The study draws on primary data collected from 200 respondents through a structured questionnaire administered via Google Forms, covering individuals from various age groups, genders, and occupations. The questionnaire captured the frequency of digital payment usage, the preferred payment method, and respondents' views on a set of statements measured on a five-point Likert scale. Percentage analysis, frequency distribution, a Chi-square test, and multiple linear regression were employed to determine whether digital payments have had a statistically significant effect on consumer spending and to identify the factors that most strongly drive this effect. The results indicate that most respondents find digital payments convenient and quick, and a large proportion now prefer them over cash, with UPI emerging as the clear favourite. Digital payments also appear to encourage more frequent spending and unplanned purchases, with cashback and reward offers playing a notable role in this trend. However, a considerable proportion of respondents remain unconvinced about the security of digital payments, and a majority reported that their overall spending has increased since adopting digital modes. The Chi-square test confirms this statistically, indicating that the increase in spending is not merely a perception but a significant pattern. A subsequent regression analysis further shows that convenience, cashback incentives, and the ease of making unplanned purchases together explain a meaningful proportion of this rise in spending, with ease of impulse buying and convenience emerging as the strongest predictors. Overall, the study suggests that while digital payments enhance convenience, they also call for greater consumer awareness and financial discipline.
Keywords
Digital Payment Systems, Consumer Spending Behaviour, UPI, Mobile Wallets, Impulse Buying, Cashless Transactions, Fintech, Consumer Psychology.
References
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[2] Faraz, N., & Anjum, A. (2025). Spendception: The psychological impact of digital payments on consumer purchase behaviour and impulse buying. Behavioural Sciences, 15(3), 387. MDPI
[3] Prathana, G., & Vadivel, M. (2026). A study on digital payment systems and their impact on consumer behaviour. International Journal of Versatile Research and Analysis, 4(2).
[4] Shah, S. et al. (2025). Digital payments and overspending: A study of payment biases and spending behaviour using mental accounting perspective. International Journal of Finance & Economics.
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How to cite this paper
@article{1723315,
author = {Dhamodharan Nehru M, Deepak Shyam},
title = {Effect of Digital Payment Systems on Consumer Spending Behaviour},
journal = {Iconic Research And Engineering Journals},
year = {2026},
volume = {10},
number = {3},
pages = {2459-2468},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1723315.pdf},
abstract = {Digital payments have transformed the way people in India purchase goods and manage their finances. Since demonetisation in 2016 and the introduction of UPI, digital payment methods—whether UPI, mobile wallets, cards, or net banking—have shifted from being a backup option to becoming the preferred mode of payment for most consumers. While digital payments are widely regarded as convenient and fast, a recurring question is whether this ease of transacting is also altering how much people actually spend. This paper examines the effect of digital payment systems on consumer spending behaviour, focusing on convenience, trust, cashback incentives, and the extent to which increased payment ease encourages unplanned purchases.
The study draws on primary data collected from 200 respondents through a structured questionnaire administered via Google Forms, covering individuals from various age groups, genders, and occupations. The questionnaire captured the frequency of digital payment usage, the preferred payment method, and respondents' views on a set of statements measured on a five-point Likert scale. Percentage analysis, frequency distribution, a Chi-square test, and multiple linear regression were employed to determine whether digital payments have had a statistically significant effect on consumer spending and to identify the factors that most strongly drive this effect.
The results indicate that most respondents find digital payments convenient and quick, and a large proportion now prefer them over cash, with UPI emerging as the clear favourite. Digital payments also appear to encourage more frequent spending and unplanned purchases, with cashback and reward offers playing a notable role in this trend. However, a considerable proportion of respondents remain unconvinced about the security of digital payments, and a majority reported that their overall spending has increased since adopting digital modes. The Chi-square test confirms this statistically, indicating that the increase in spending is not merely a perception but a significant pattern. A subsequent regression analysis further shows that convenience, cashback incentives, and the ease of making unplanned purchases together explain a meaningful proportion of this rise in spending, with ease of impulse buying and convenience emerging as the strongest predictors. Overall, the study suggests that while digital payments enhance convenience, they also call for greater consumer awareness and financial discipline.},
keywords = {Digital Payment Systems, Consumer Spending Behaviour, UPI, Mobile Wallets, Impulse Buying, Cashless Transactions, Fintech, Consumer Psychology.},
month = {September},
}