The Neuroscience of Spending: Why Digital Payments Kill Our Budget Control
New research proves the 'pain of payment' is a real emotional brain response. As digital payments surge in 2026, Israeli households face rising debt through installments.
You stand in line at a neighborhood café on a busy morning, or scroll through a delivery app late at night. You choose an indulgent dish, perhaps a decadent dessert, and tap your mobile phone to the terminal or click the Buy button with one quick touch. In that split second, nothing feels like a loss. On the contrary, the excitement and anticipation fill you. But what would happen if, instead of swiping your credit card or touching the screen, you had to open your wallet, pull out three physical fifty-shekel bills, count them one by one, and hand them over to the seller?
Suddenly, that casual and flowing purchase takes on a completely different weight, and there is even a feeling of slight physical pain. This sensation is no accident, and it is far from being just a matter of convenience. Groundbreaking scientific research reveals that behind this small difference lies a fascinating biological mechanism managing our financial decision-making—a mechanism that modern digital economics does nothing to dull.
The Pain of Payment
For decades, classical economists assumed that when we examine a product's price tag, our brain performs a cold, rational calculation of "opportunity cost"—what we could buy instead with the same amount of money. Behavioral economics theories offered a different explanation: parting with money involves an experience of "direct and immediate unpleasantness," a term known as the "pain of payment."
Now, leading research published in the prestigious and influential Journal of Economic Behavior & Organization provides the first unequivocal proof that the pain of payment is not merely a psychological metaphor, but a tangible and entirely scientific emotional experience. Using advanced brain scans (fMRI), researchers—Nicole Robitaille from Queen's University in Canada, Hilke Plassman from the INSEAD Business School in France, Nina Mazar from Boston University, and Axel Lindner from the University of Tübingen in Germany—discovered that while consumers make real purchasing decisions, a brain region called the "anterior insula" is activated and reacts directly to the amount they are about to pay, triggering real emotional pain—similar to the experience of social rejection, heartbreak, or loss.
While receiving a physical blow or electric shock activates both physical and emotional pain systems in the brain, spending money selectively activates only the emotional pain systems. In simple terms, our brain experiences parting with money as a form of emotional suffering and loss.
The big question that remained open was whether this emotion is merely neural "background noise," or if it serves as a practical tool dictating our consumer behavior. The conclusions of their experiment, in which they used placebo pills to influence subjects' feelings, proved that once the emotional pain is attributed to an external factor, the consumer brake is simply released, and subjects were willing to pay more for a gift card—about 50% higher than those who felt the same "emotional pain"—providing definitive causal proof that emotion, rather than cold calculation, manages our wallets.
Credit Card as Painkiller
Those who help us overcome the pain and spend more money are, of course, credit cards, payment apps, and even "one-click" shopping that function as neurological "painkillers." They allow us to spend money without feeling the emotional "pinch" of parting with it.
In the Israel of 2026, this trend translates into alarming household financial strategies. New and official data from "Menora ERN," which manages and insures check and standing order transactions for businesses, reveals an unprecedented surge in installment debt as a daily cash flow survival tool. According to the data, the volume of installment transactions in June 2026 surged by 64% compared to June 2025, while the total amount of these transactions jumped by 79%.
The average check transaction rose to 3,230 shekels (a 23% jump from last year), and for standing orders, the average transaction stood at about 12,900 shekels. The most prominent jumps were recorded precisely in unplanned essential service expenses: an astounding 250% surge in the number of standing orders at garages, and an 80% increase in dental treatments (two areas where the average transaction amount reached about 15,000 shekels in June).
In northern Israel as well, with the return to economic activity in June 2026, an 80% surge in installment payments via standing orders was recorded compared to last year. These figures show that Israeli households are using installment plans as a financial means for "buying time." By delaying payments and eliminating immediate financial friction, they roll present cash flow difficulties into the future while total debt swells below the radar. When the brain does not feel immediate payment pain in its full intensity, the path to the financial abyss is shorter than ever.
Thirsty for Control
Prof. Dudi Gershon, a finance expert and founder of the digital cash app KashCash, explains that consumers today are thirsty for tools that will restore true control over their budget. As proof, he points to the app he developed, which has registered over 1.6 million downloads and about 800,000 active daily users since its launch about a year and a half ago.
A comprehensive survey conducted by KashCash in the first half of 2026 among the 10,000 customers with the highest activity volume on the app reveals a deep behavioral shift: the use of digital cash led to an average 31% drop in credit card use among these customers, driven by a desire to improve household budget control.
"Unlike credit cards that put the brain to sleep, digital cash turns out to bring back healthy pain. The user pays and watches their digital cash balance drop on the screen in real time—shekel by shekel, and the brain reactivates self-control systems."
In an era where money is becoming a completely transparent and digital entity with less cash usage, understanding how our brain experiences and must experience the "pain" of shopping is not just a fascinating academic theory—it is a vital survival tool for every household.
