According to the NZZ am Sonntag, 1 to 1.5% of the credit balances of visitors to Swiss festivals, which have introduced the cashless prepaid system with chip, are not reclaimed within two years. In many cases, the remaining amounts are small and the reimbursement process is too time-consuming. The cashless payment system at festivals has also changed consumer behaviour. At Open Air St. Gallen, for example, sales have risen since the introduction of the cashless system in 2013. A festival visitor in St. Gallen now spends an average of 126 francs. What are the possible reasons for the increase in expenditure compared to earlier times, when only cash payments were possible?

People spend more with cashless means of payment and their willingness to pay is higher, as current research shows. An experiment shows that people who pay by credit card are willing to pay twice as much as people who pay in cash. In general, consumer spending increases the less transparent the payment, the lower the “pain of paying” and the less obvious the link between payment and consumption is. Cashless means of payment also change consumer behaviour to the extent that people make more impulsive purchasing decisions, tend to buy unhealthy food and more durable products (compared to cash payments).

Together with credit-based “mobile payments”, the chip on the arm is the payment option among the most common means of payment that favours spending the most. Its payment process is non-transparent because it does not physically transfer the payment amount, i.e. the “pain of paying” is low. The control and budget function is insufficient compared with cash. This reduces the inhibition threshold for festival sellers to charge too high prices for their products.

Because credit must first be loaded onto the chip (prepaid), consumption is strongly decoupled from payment in terms of space and time. In addition, visitors cannot perfectly anticipate the correct level of their future consumption. This often leads to over-consumption and to a one-time ore several time loading of excessive credit. In other words, it is almost impossible to load the (behaviorally and) economically correct amount onto the chip.

Consumers will have greater pleasure in later consumption by using the prepaid function – compared with a “pay-as-you-go” function. For many, the amount has already been written off, which is why they unconsciously perceive their future consumption as it was free (similar to a menu à discrétion) and the “pain of paying” is therefore minimal.

In addition, the contactless payment function of the chip favours consumption behaviour. It enables a fast, convenient and simple payment process, which minimizes queues and favors spending.

To conclude, the festival organisers not only benefit financially from the residual amounts left behind by the introduction of cashless systems, but also mainly from additional expenditure by consumers.

However, the cashless, closed-loop chip system is also beneficial for the organisers for other reasons: Firstly, they are more economically liquid because the credit balance must be paid in advance. Secondly, the financial risk for the organisers and stand operators is reduced because cash can “disappear” from time to time (e.g. due to incorrect billing, fraud, theft, loss, etc.). Fourthly, the costs incurred by the organiser with respect to cash handling are minimised, in particular transaction costs for exchange, storage, transport, insurance, change and invoicing. Fifthly, the organisers and stand operators can optimise their order quantities, supply chains and personnel planning through detailed data analysis of consumer habits. Other benefits analyzing the exact consumption data are also conceivable.

In summary, the advantages of the cashless chip system outweigh for the organisers. Nevertheless, some festivals have switched back from cashless to cash payments because it meets a customer need. In this respect, it would be desirable if debit, credit and mobile payment options were also applicable.

Read more about the payment behaviour of the Swiss population in the Swiss Payment Monitor 2019.


About the author(s)


Dr. Tobias Trütsch Managing Director


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