THE DISTANCE THAT MONEY HIDES: A TANGIBILITY-EFFECT ACCOUNT OF WHY PAYMENT FORM SHAPES SPENDING

Abstract

This study examines how different forms of money produce distinct psychological effects through a new concept termed the tangibility effect, which refers to the psychological distance between the subject and the object. Although previous literature links higher cashless spending to the pain of paying, it provides limited explanation of why this effect occurs. Drawing on converging evidence from five domains, namely time framing, the IKEA effect, the Ring of Gyges, the trolley dilemma, and spectator absence in sport during COVID-19, the study argues that psychological responses vary inversely with subject-object distance. A tangibility gradient is established across cash, cheques, and electronic money, while a dilemma experiment demonstrates that changes in distance alone can reverse judgement. The findings indicate that different forms of money possess different levels of tangibility, which shape individuals’ psychological responses and spending behaviour. Accordingly, credit and debit cards are more likely to encourage spending than cash and cheques. The tangibility effect is distinguished from proximity, which is unidirectional and limited to material objects, whereas tangibility is bidirectional and can also apply to non-material objects. Although the study considers neurological, economic, and psychological perspectives, its primary focus is psychological, concluding that the dematerialisation of money is fundamentally a problem of distance before it becomes a technological one.