A study on the use of credit cards and their effects on

spending and retail marketing: A case study from the

Retail industry of Sri Lanka
Table of Contents
Chapter 01..................................................................................................................................3

Background of the study........................................................................................................3

Problem Identification............................................................................................................4

Problem Justification..............................................................................................................4

Research Objectives...............................................................................................................4

Research questions.................................................................................................................5

Chapter 02 - Literature Review..................................................................................................5

Perceived Usefulness.............................................................................................................7

Perceived Ease of Use............................................................................................................7

Social Influence......................................................................................................................7

Perceived Trust.......................................................................................................................8

Lifestyle Compatibility..........................................................................................................8

Chapter 03 - Research Methodology..........................................................................................9

Conceptual Framework..........................................................................................................9

Hypothesis Development.......................................................................................................9

Research methodology.........................................................................................................10

Analytical tools used............................................................................................................11

References................................................................................................................................11
Chapter 01
Background of the study
Credit score cards had been first utilized in prosperous nations and have been fast followed
by means of developing international locations like Sri Lanka. they're now a hugely massive
charge choice used by people everywhere in the world (Kuruppuge et al. 2017; Gan et al.,
2016; Wang et al., 2011). credit score cards are used by 23% of individuals international who
reveal formal borrowings. simplest eight% of adults in rising economies usually use a credit
card, in comparison to the forty-nine% of excessive-earnings economies who did so in 2017.
(International Findex Database, 2017). credit playing cards had been to begin with presented
by way of industrial banks in Sri Lanka in 1989, in keeping with the idea of a free and open
economic system. despite the fact that 74 percentage of the population in Sri Lanka has a
financial institution account, simplest 5 percent of human beings have credit score playing
cards, consistent with records from the sector bank on global monetary inclusion. There were
1435053 credit cards utilized in total in 2017, a thirteen.5 percent increase from 2016.
(CBSL, 2017). humans fee credit score playing cards increasingly more because of the
numerous benefits they provide for customers. those blessings encompass a reduced need to
carry cash, access to a correct record of purchases, and evidence of creditworthiness inside
the past (Soll et al., 2013). conventional beliefs including "store first and spend later" have a
negative impact on Sri Lankans' growing use of credit playing cards.

E-upward thrust commerce's is a giant incidence in emerging countries. however, given the
still-sizable discrepancies among e-trade purchases made online and offline, hopes for its
expansion have now not absolutely been reached. energy and facts-primarily based
transmission are crucial help structures had to boom the safety of purchaser private statistics
utilized in e-trade. Blockchain technology can be critical in imparting secured databases and
safeguarding facts distribution, consistent with Bibri. To analyse e-trade with specialised
functions, mainly while the device is located within the society to seize consumers'
intentions, clever technology networks and net-based operating devices are required.

charge options have evolved fast at some point of the last few decades due to technical
improvements. clients utilize debit or credit score playing cards, as well as cell payments,
similarly to conventional coins in both on line and offline environments. for the reason that
COVID-19 outbreak, the use of mobile payments has substantially improved (Grover et al,
2020). Even some experts and observers think the prevailing COVID-19 state of affairs may
additionally hasten the transition to a cashless society (Huet and Murray, 2020). In brand new
virtual age, how do cashless fee methods like credit score playing cards and cell bills affect
customers' spending conduct? the existing examine changed into pushed by way of this
question.

Problem Identification
Notably, there have been very few attempts to quantify the relationship between credit score
card utilization and spending quantities, perhaps as a result of how tough it's miles to deal
with the endogeneity trouble. There are several reasons why this might be the case, which
includes that credit card users are different (e.g., extra affluent) than users of coins. prior
pass-sectional research has found out that customers generally have a tendency to spend
greater the use of credit score playing cards than with cash (Hirschman 1979). much like the
previous experimental research, which turned into extraordinarily restricted, some proof of a
positive influence of credit card use on spending was observed; but, most people of this
research is prone to the perception that money customers might also have spent much less
due to liquidity regulations.

Problem Justification
The outcomes of marketplace experiments completed through a major financial institution
inside the USA, in which six one of a kind preapproved credit score card solicitations (with
one of a kind introductory interest rates and intervals) had been randomly mailed to ability
clients, provide evidence in assist of this "underestimation hypothesis," consistent with
Ausubel (1999). the principle locating is that human beings overreact to introductory hobby
fees but pay inadequate attention to (1) how long the introductory charge might be in impact
for and (2) the interest charge with a view to take impact on the quilt of the introductory
period, which results in human beings paying more interest standard. Although the
underestimation hypothesis focuses on faulty spending predictions rather than the levels of
credit card use (which is what we're interested in), such underprediction would be constant
with a idea wherein credit playing cards lead to increased spending however humans are
ignorant of this effect.

Research Objectives
The following research objectives are developed for the research.

1) To identify the factors which impacts the use of credit cards in the Retail industry of Sri
Lanka.
2) To identify the factors which impacts the effects on spending and retail marketing in the
Retail industry of Sri Lanka.
3) To identify the relationship between the impacts the use of credit cards and effects on
spending and retail marketing in the Retail industry of Sri Lanka.
4) To identify the most salient factor which impacts the relationship between the use of
credit cards and effects on spending and retail marketing in the Retail industry of Sri
Lanka.
5) To provide recommendations to improve the relationship between the use of credit cards
and effects on spending and retail marketing in the Retail industry of Sri Lanka.

Research questions
Based on the research objectives developed above, the following research questions are
identified for the research.

1) What are the factors which impacts the use of credit cards in the Retail industry of Sri
Lanka.
2) What are the factors which impacts the effects on spending and retail marketing in the
Retail industry of Sri Lanka.
3) What is the relationship between the impacts the use of credit cards and effects on
spending and retail marketing in the Retail industry of Sri Lanka.
4) What is the most salient factor which impacts the relationship between the use of credit
cards and effects on spending and retail marketing in the Retail industry of Sri Lanka.
5) What are recommendations to improve the relationship between the use of credit cards
and effects on spending and retail marketing in the Retail industry of Sri Lanka.

Chapter 02 - Literature Review

A new improvement in e-trade is the use of cashless price the usage of digital systems, that is
a clever payment alternative in many developing countries to acquire a sustained aggressive
gain (Capgemini, 2019). In societies, intake and client conduct are critical variables, in
particular in 2020 all through the coronavirus disease 2019 (COVID-19) outbreak. New
methods of life have been encouraged by means of client conduct, which has been drastically
influenced by digitalization. digital bills have stepped forward in reliability with the growing
use of on line services, blended with the diversification of providers and the dimensions in
their shipping network (Li et al, 2020). The transition from guide to on-line transactions has
been accelerated by means of the upward thrust of digitalization thru the net. As a result,
using digital cash (or "e-cash") to complete transactions has end up essential. The troubles
with handling currency and lengthy-distance transactions have thus far been solved by way of
digital wallets and net transactions. moreover, e-wallets may be crowned off with price range
from another similar device's wallet the use of any sort of transaction (Sohail et al, 2018).
through utilising internet banking, debit or credit score cards, and some of different price
systems, using e-wallets (AEW) is connected to digital foreign money and improves the
factor of sale each time and anywhere. moreover, e-wallets make buying and selling
transactions easier thru the usage of phone apps, permitting one to perform on line purchases
quickly and easily.

A credit score card is a kind of payment that allows users to pay for services and products and
use coins credit up to the predetermined credit score limits that have been assigned to them.
the primary credit card changed into advanced in the nineteenth century, no matter the reality
that it lacked some of the features of the modern-day credit score card. The inn Letter credit
agency, set up within the US, produced the primary credit card in history in 1894. through the
years, it was used to modify numerous oil companies and shops to verify purchaser debts. the
first credit card, called the "Dinners clubs," changed into brought to the Turkish market in
1968.due to the high inflation at the time and the crises brought on by using interest fees,
credit card use become still rather restrained. however, due to the fact to the enlargement of
the sector's financial markets in the 1990s, charge gadgets unfold now not simply globally
however also in Turkey. (2006) Aysan and Müslender.

Moreover, in advance studies appeared into the method underlying how payment structures
have an effect on spending conduct. The ache of paying is one mechanism that has received
quite a few attention (Prelec and Loewenstein, 1998; Raghubir and Srivastava, 2008; Thomas
et al., 2011). That research validated that, in comparison to cash, credit score cards reduce the
ache of payment (i.e., charge transparency), which will increase expenditure. while
contrasting mobile bills with credit playing cards, Boden et al. (2020) proposed this
mechanism as the underlying process within the courting between cellular payments and the
WTP. They hypothesized a new mechanism (i.e., payment convenience) similarly to the price
pain and observed the predicted mediating effect. With a purpose to higher recognize the
impact of mobile bills (and credit cards) vs cash on spending behaviour, this research also
compares the two price techniques.
Soman (2003) located a terrible affiliation among "price transparency" and spending in a later
discipline investigation (albeit this study become not randomized). At the entrance to a big
grocery store, he accumulated receipts from clients and categorised each object as either
bendy or rigid (an rate that would vary relying on an expansion of standards inclusive of fee
and amount to be had). He found that common credit card spending become much more than
check spending, which become better than coins spending for flexible items, but there was no
difference in expenditure on inflexible objects between fee strategies. Although this end
result indicates that humans use credit playing cards more often than coins to make flexible
purchases, either liquidity regulations or self-choice into credit card use provide possible
motives for the findings.

Perceived Usefulness
A person's belief that the usage of the device will decorate task overall performance is called
perceived usefulness (PU). In essence, it describes a user's cognitive anticipation regarding
the effectiveness of the technology (Liu, 2016). consequently, customers suppose that the use
of such a machine will help them obtain their monetary and way of life dreams, in addition to
creating their numerous transactions greener. additionally, it has been established that PU has
a favourable effect on the intention to use e-payments underneath unclear instances (Intarot,
2018). To ensure that purchasers revel in the use of e-wallets as an alternative payment
approach, particularly to forestall the spread of COVID-19, this usefulness may additionally
provide extra offerings. Perceived application has been diagnosed in earlier research as a
effective predictor of customer behaviour intention. The contribution of the virtual
infrastructure to the facts delivery gadget increases the impact of the system's perceived
usefulness at the goal to apply the generation (Chawla, 2020).

Perceived Ease of Use

Perceived ease of use is a key aspect in determining person mind-set and behaviour aim to
undertake and use a generation. there may be proof that customers' intentions to shop for are
substantially motivated with the aid of perceived ease of use (PE). therefore, a customer's
perception of the usability of e-wallets may be stimulated with the aid of previous purchasing
stories (Hoque, et al, 2018). Several users of the e-wallet app rated their revel in as being
simple. therefore, perceived usability represents how simple it's miles to use a generation to
browse a internet site and make an internet transaction. using era is extra profitable for on
line users; in other phrases, because a technology can be carried out extra without problems,
clients would pick it as their preferred payment approach for transactions (Hossain et al,
2018).

Social Influence
A considerable social impact (SI) framework has been developed to evaluate customer
interest in mobile price. circle of relatives contributors, buddies, co-workers, and associates
are feasible AEW utilization influencer. consequently, SI refers back to the influence of
environmental elements that motivate clients to buy or promote new items. in addition,
Chaouali et al. showed that social influence changed everyone's angle at the use of recent
progressive objects via technological services, at the same time as Martins et al. observed
that social have an effect on had an effect on line users' intentions to use net offerings. Social
effect (SI) is the result of ways social variables and subjective norms affect behaviour and
goal to make use of e-money in UTAUT (Tarhini et al, 2016).

Perceived Trust
Clients will maintain to make use of the application to make purchases as quickly as they
begin to agree with the gadget or the service provider. in line with Hoque and Alam, facts
evoke a positive stage of consider within the facts supply. consequently, spotting the danger
to use the purchaser's earlier know-how to establish accept as true with can growth the
consumer's preference to make a buy. agree with in the facts supply would possibly
consequently have a big impact for your selection to shop for. in step with Sullivan and Kim,
customers' intentions to make additional purchases on line may additionally enhance as their
believe grows due to the low perceived hazard they revel in while the use of the device (Lin,
2019). Perceived consider (PT), which lowers perceived chance for the duration of the
transaction, has a considerable effect on forecasting one's purchase purpose, according to
Kim et al., therefore, perceptions of a cell price gadget's reliability are critical for enhancing
company sales (Shaw, 2019).

Lifestyle Compatibility
The herbal alignment of way of life alternatives and values is called lifestyle compatibility
(LC). To lessen the feasible uncertainty of the usage of era in regard to a consumer's cost,
reviews, life-style, and options, this thing of lifestyle compatibility is crucial. In light of this,
lifestyle compatibility has a vast effect on conduct and could be very beneficial in
determining purchasers' behavioural intention. The adoption of an e-wallet was proven to be
at once impacted with the aid of way of life compatibility with era, that is associated with
prior enjoy and cost, according to Herrero et al., customers who are used to the usage of
packages will certainly believe that generation makes it simpler for them to make purchases
(Herrero et al, 2014).

Chapter 03 - Research Methodology

Conceptual Framework
Based on the literature review conducted, the following conceptual framework is developed
for the study.

Perceived Usefulness

Perceived Ease of Use

Effects of credit cards on
Social Influence spending and retail
marketing

Perceived Trust

Lifestyle Compatibility

Independent Variable Dependent Variable

Hypothesis Development
Alternative hypothesis Null hypothesis
Hypothesis 01 H01 – There is a positive H010 – There is a positive
relationship between Perceived relationship between Perceived
Usefulness of credit cards and Usefulness of credit cards and
spending and retail marketing in Sri spending and retail marketing in Sri
Lanka Lanka
 Hypothesis 02 H02 – There is a positive H020 – There is a positive
relationship between Perceived relationship between Perceived
Ease of Use of credit cards and Ease of Use of credit cards and
spending and retail marketing in Sri spending and retail marketing in Sri
Lanka Lanka
Hypothesis 03 H03 – There is a positive H030 – There is a positive
relationship between Social relationship between Social
Influence of credit cards and Influence of credit cards and
spending and retail marketing in Sri spending and retail marketing in Sri
Lanka Lanka
Hypothesis 04 H04 – There is a positive H040 – There is a positive
relationship between Perceived relationship between Perceived
Trust of credit cards and spending Trust Social Influence of credit
and retail marketing in Sri Lanka cards and spending and retail
marketing in Sri Lanka
Hypothesis 05 H05 – There is a positive H050 – There is a positive
relationship between Lifestyle relationship between Lifestyle
Compatibility of credit cards and Compatibility Social Influence of
spending and retail marketing in Sri credit cards and spending and retail
Lanka marketing in Sri Lanka

Research methodology
For the house, the positivist method of examine became employed. this is because
assumptions are used in research using real techniques that have been constructed to
accumulate perspectives inside the setting of estimates. The logical exam strategy is taken
into consideration while analysing the assessment's research methodology due to the fact the
evaluation's hypotheses had been advanced from the found text and might be demonstrated
by using information evaluation. A self-administrated survey so one can be provided to the
chosen check utilizing abnormal examining will be applied to collect information for the
critical data analysis within the assessment's evaluation research technique. A mono strategy
might be followed for this overview's examination due to the fact the auxiliary records might
best be employed to assist the research. The investigation into the most vital information may
be guided through a quantitative self-administrated survey.
Due to the fact the facts received from the fundamental data exam may be correct for a
restricted time and will range over the years, this examine is go-area research. The observer’s
examination unit will be greater specially called "individuals, each male and lady, who are
utilizing credit playing cards in Sri Lanka." in keeping with a 2020 observe by Gamage and
Kumudumali, barely 5% of Sri Lanka's populace, or about 1 million people, use credit score
playing cards. according to this, a sample of 384 people can be seemed because the examiner
(Krejcie & Morgan, 1970).

Analytical tools used

The maximum essential effects from a self-directed survey could be examined the use of the
Measurable bundle for Sociologies Programming (SPSS). The validity and reliability of the
standards might be assessed in order to weed out any additives that aren't important to the
evaluation earlier than making use of unambiguous measurements to the factors. The
speculation trying out will begin with man or woman connection testing, and relapse may be
used to boost the evaluate model.

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