Two-faces of the online prepaid card

Abstract

This study explores the effects of online retailer-specific prepaid card on the consumer’s purchase behavior and consumption behavior. Online retailer-specific prepaid card is a type of the prepaid card whose usage is limited in specific online sites or platforms. Because of its unique payment process, need to purchase online prepaid cards before using the online prepaid card, online retailer-specific prepaid card changes consumer’s purchase behavior and consumption decision. To empirically analyze how online prepaid card affects consumer’s spending and consumption decision, we analyze 13-month individual-level panel data from the Korean e-book site. Results indicate that prepaid card makes a different impact on the spending and consumption. Whereas consumers spend more money if they use online prepaid card, consumers complete to read e-book less if e-book is bought by using online prepaid card. One of the prime explanation for this result is the effect of past payment on purchase and consumption. Because money in prepaid card is already paid, consumers have great motivation to use all of them and spend more money. On the other hand, time difference between paying money and purchasing product increases the time lag between payment and consumption, and decrease the positive effect of payment on consumption. Thus, consumers consume products less. By empirical analysis, we show that the time difference between paying money to buy a prepaid card and purchasing product by using money in prepaid card decreases the consumption rate