12/18/2018
By Ed Brennen

They’re a familiar sight during the winter holiday season: the Salvation Army’s iconic red kettles, accompanied by volunteer bell ringers who thank busy shoppers for whatever coins and bills they can spare.

But as mobile payment apps like Venmo, PayPal and Apple Pay gain in popularity and more people elect to go “cashless,” what does that mean for charitable organizations that depend on cash donations? Or for street performers and panhandlers who count on passersby to stop and drop a few quarters in the hat?

It’s a question that Spencer Ross, assistant professor of marketing, entrepreneurship and innovation (MEI) in the Manning School of Business, has been researching for more than a year, ever since he saw a panhandler in downtown Boston holding a sign that included his PayPal username.

“People have been using credit cards for generations, so this isn’t a completely new trend,” Ross points out. “But as mobile payment apps become more prevalent, particularly with younger crowds, we don’t even need our wallets – just our phones.”

According to one recent industry study, 68 percent of Gen Z consumers are interested in instant person-to-person payments – more than any other age group.

Through a series of studies at the Manning Behavioral Lab and Participant System (B-Lab), an interdisciplinary research program that he co-directs with MEI Asst. Prof. Ann Kronrod, Ross is examining the impact of technology on charitable giving.

He sat down recently to discuss the ongoing research, which he is conducting with Sommer Kapitan, a colleague at the Auckland University of Technology in New Zealand. They hope to submit their work to the Journal of Consumer Research.

Q: What’s the difference between giving cash or transferring money through an app?

A: When we pay for something using cash, we’re parting with the tangible money, the value we have in our wallet. In a normal retail context, it becomes more psychologically painful to pay with cash. Using cashless payment mechanisms should make it easier to give, but donations aren’t the same as retail contacts. Donations foster a different sense of mood, a sense of empathy. Cash is also visible. When people give a donation, there’s a rub-off effect, which we call in the literature “warm-glow altruism.” Yes, I’m doing it for them, but it also makes me feel a little bit better about myself. That’s been one of the more effective ways of getting people to do good. If you take away the ability to be visible, you don’t get that same type of feeling as when you hand someone a dollar. That may inhibit people from making these types of donations. So we started looking at what explains these behaviors. Is it the pain-of-payment mechanism that’s changing? Is it the public visibility?

Q: What type of studies have you conducted so far?

A: For one study, which was funded by the Donahue Center for Business Ethics and Social Responsibility, we hired a street performer to play guitar on Newbury Street in Boston over three days last summer. We gave people the option of using cash or Venmo, and then we had her raising money for herself, raising money for charity, or raising money for herself with no performing. Of the 12,000 people who walked by, about 100 people gave around $300 in cash donations. She only received two donations via Venmo for a total of $4. People were not willing to open up the app to make a donation.

We also ran an online pain-of-payment experiment where we showed students a picture of a guy holding up a sign with credit card, cash or Venmo donation options. We asked how painful it was to give on a scale of 1 to 5. Our overall finding so far is that people are more likely to donate cash, but when they donated using an app, they donated more on average, which makes sense, because if you’re going to make the effort to take out your phone and use an app, you’re not going to just give $1.

We also just completed a controlled lab experiment with student volunteers where we looked at the difference between how people behave with cash vs. Venmo, and the difference between deliberate vs. impulsive giving. In other words, what happens if you know in advance that there’s a donation to be made? In a lot of instances, the donation is impulsive; you walk by a person and may never see them again. We gave students either $5 in cash or $5 via Venmo up front to perform a few tasks on the computer and then either informed them, or not, that they could make a donation later on. We’ll see what the results show.

Q: Are charitable organizations adapting to a cashless future?

A: There’s a company in Boston that we’re hoping to do a study with called DipJar. They make self-contained credit card units that nonprofits can use at events and galas. They can preset a donation amount and people just swipe their card in to make a donation. They’ve used them with the Salvation Army, where they attach the mobile units to the kettles. It dings and lights up as a public acknowledgement when someone makes a donation.

Q: Why does this research interest you?

A: I like it because it has the pro-social side, but also the tech side. In China, they’ve been handing out QR codes for the social media platform WeChat, for homeless people to be able to solicit money. But I wouldn’t have asked the question had I not seen that guy’s sign that said, ‘Hey, you can donate via an app.’ I checked on his PayPal handle online, and he’d had two donations in three weeks, which kind of confirms what we’ve been finding. He’s probably doing better in that cup than using the app. It’s not the panacea he may have thought it would be.