©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS (Hidden) fees for card payments: Would transparency change consumer behaviour? Elke Himmelsbach Nico A. Siegel 30 September 2013 – Applying Behavioural Insights to Policy-Making – EC Conference, Brussels

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Contents 2 1 Rationale 2 Methodology 3 Findings 4 Policy Implications

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS The issue: Hidden payment charges 3

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS The issue: Hidden payment charges 4

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Policy Objectives of the European Commission 5 More transparency of payment charges Changing behaviour of consumers More price competition Lower charges for consumers

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Research Objectives 6 Explore consumers´ decision process: A.Identify the main individual biases and external barriers B.Identify the most effective policy options  … that prevent/drive cost-conscious payment choices from a consumer perspective

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Mapping the Payers´ Decision Process ACCESSASSESSING & ANALYSINGACTING (or not) AwarenessIntentionBehaviour Beliefs & Attitudes 7  Cultural norms & national legislation  Individual resources available  Overconfidence bias  Indiv. habits/status quo bias  Context/Choice architecture  Low relevance of cost savings  High preferences for convenience, security  Information overload  Loss aversion bias  Push/Provision: No (easy) access  Pull/Attention: Low issue salience BEHAVIORAL THEORY: Potential biases and barriers

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Choice architectureInformation based measures Tested Policy Options 8 Education Did you know …? - X%/€ rebate + X%/€ surcharge Merchant cost information FYI: merchant costs are … Cost differentiation

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©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Experimental design: Store types and payment scenarios 10 Offline € 20 Online € 20 Offline € 200 Online € 200 Payment options (if owned)

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS 30 Treatment splits + 1 control group Covering all relevant stimuli combinations 11 EducationMerchant cost information Payment costs not included Payment costs included Yes or no SurchargeRebateNo rebate The overall sample of respondents across 10 EU countries allowed for robust sample base per split (n=324). Did you know …? Same price - X%/€ rebate + X%/€ surcharge FYI: merchant costs are … Timings of information given: Before first entrance At entrance and at the till Only at the till At the till and on the receipt

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS 12 Example/Extract of experimental design © TNS Infratest 2013 This store will accept several payment methods: All the prices displayed include VAT and payment charges. If you pay cash, a 2% rebate will be applied to your bill. If you pay by debit card, a 1% rebate will be applied.

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS 13 Example/Extract of experimental design That will be 200 €. How would you like to pay? >> Payment conditions:2% rebate1% rebateno rebate Total amount to be paid: € € € I would walk to nearest ATM and then pay with cash. I am collecting reward points. © TNS Infratest 2013

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS 14 Example/Extract of experimental design © TNS Infratest 2013 Here is your receipt. >> Thank you for your purchase! Total incl. VAT (in €): Payment charge: Rebate for Debit Card Final total incl. VAT (in €):198.00

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS 3 Findings 15

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Which policy options were most effective in driving cost-conscious consumer choices? Education Did you know …? Extract of results based on logistic regression analysis to identify statistically significant drivers of cost-conscious choices. Values display strength of regression coefficients. Base: EU10 (without missing variables) – offline scenario (n = 8018) – online scenario (n = 7490) Not significant - - On- line Off- line Strongly significant *** (p < 0.001) 16 Rebates - X%/€ rebate Surcharges + X%/€ surcharge Merchant cost information FYI: merchant costs are …

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Loss aversion & Overconfidence Which behavioural biases were identified? Loss aversion & Overconfidence 17 A. STATED PREFERENCES: Should you face surcharges (…), do you intend to -Refuse to shop in this store 25% B. OBSERVED BEHAVIOUR: Always made cost-efficient choices … -In the offline shopping scenarios30% Base: EU10 – all respondents (n = ) + X%/€ surcharge Overconfidence bias (A-B):24%-points -Generally use a cheaper payment method and avoid surcharges54% -Generally pay the surcharge6% -Only avoid the surcharge when spending a higher amount10% -Don´t know6%

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Status quo bias Which behavioural biases were identified? Status quo bias 18 Extract of results based on logistic regression analysis to identify statistically significant habitual drivers (Q12/13) of cash choices in the offline shopping scenarios. Values display strength of regression coefficients. Base: EU10 (without missing variables) n = More frequent cash payments B:.274 *** Habits driving cash choices Less frequent offline shopping B:.190 ** Less frequent credit card usage B:.177 *** High amount of cash in wallet B:.250 *** Less frequent debit card usage B:.203 *** Less frequent mobile payments B:.088 **

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Drivers of cost-conscious choices in offline scenario 19 R2:R2: Policy optionsMotives & goalsHabitsSocio- demogr. Extract of results based on logistic regression analysis to identify statistically significant drivers of cash choices in the offline shopping scenarios. The model explains 42% of the variance. Only variables with strong significance *** (p < 0.001) are displayed. Base: EU10 (without missing variables) n = Low purchase value Country effects Younger age High cost relevance Low convenience relevance High budget control relevance High cash frequency Low debit card usage Low credit card usage High cash amount in wallet Surcharge Rebate Timings (cost info) Education Context matters! Reg. coeff.

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS 4 Policy Implications 20

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Summary of Policy Implications I Information based measures 21 Did you know …?  Payment choice is highly habitualised with low consumer attention.  Simple notifications do not change consumer behaviour.  Education treatment has strong impact within lab testing. Further evidence required whether impact visible in real life.  Consumers change behaviour only if cost differences are made relevant to them directly in form of rebates or surcharges. FYI: merchant costs are …

©TNS X AXIS 6.65 BASE MARGIN 5.95 TOP MARGIN 4.52 CHART TOP LEFT MARGIN RIGHT MARGIN TNS Summary of Policy Implications II Direct regulatory measures 22 - X%/€ rebate Rebate + X%/€ surcharge Surcharge Does not drive issue salience. Provides a positive framing and is more accepted. Is less effective than surcharges in driving cost-conscious choices. Is most effective in driving cost-conscious choices. Drives issue salience. Provides a negative framing and is less accepted.