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University of Iowa News Release

Feb. 21, 2006

Research: Banks Could Influence Consumer Spending Via ATM Distributions

A new study from the University of Iowa suggests that banks could potentially influence future consumer spending by distributing smaller bills over larger ones at ATMs.

The study, "Money: A Bias for the Whole," forthcoming in the March 2006 issue of the Journal of Consumer Research, explores consumer cash handling behavior. The study finds that the majority of consumers prefer to hold on to larger bills and to pay with an equivalent dollar amount of small bills. 

The findings are clearly important, given that cash is still utilized in $1.3 trillion worth of transactions in the United States alone, said Dhananjay Nayakankuppam, associate professor of marketing at the UI's Tippie College of Business. He authored the study with UI doctoral students Himanshu Mishra and Arul Mishra.

"It appears that money is not just regarded as a medium for transactions. The denomination of the bill plays significantly into a customer's willingness to spend," write the authors.

They call the tendency to hold a larger bill in higher regard as "a bias for the whole." The authors also use the phrase, "processing fluency," which refers to the customer's ease at assessing the bill's value. It is easier to assess the value of a large bill -- a $100 bill is worth exactly that -- one hundred dollars. The fact that smaller bills (10 $10 bills) can combine to form various values (e.g., $20, $50 or $100), actually hinders the consumer's processing fluency or ability to give the currency one unique value.

"Large bills are evaluated more favorably than a number of smaller bills totaling the same amount. People are happier trading their small (rather than large) bills for things," said Nayakankuppam.

In a pilot study, 64 participants were asked their willingness to buy four products: a t-shirt, cap, backpack or shoes, using a 10-point scale. They were randomly assigned to one of two conditions, where they were either told they had a $100 bill or 10 $10 bills. Participants with 10 $10 bills indicated a greater willingness to buy than those with a $100 bill.

In another experiment, the researchers tried to influence the way consumers look at smaller bills. They reasoned that if they could get participants to group the smaller bills into a whole or larger value, participants with the smaller bills would also obtain a 'processing fluency' and become reluctant to spend their money. The first portion of the experiment asked participants to put together geometric parts into larger objects. For example, circles, triangles, and rectangles could be put together to form a picture of a house or an automobile. The researchers found that after performing these tasks, participants demonstrated the same 'processing fluency,' and were more aware of the accumulated value of the smaller bills. When offered an opportunity to make a purchase, these participants were more reluctant to spend the smaller denominations.

For many consumers, ATMs have become their primary source of cash. The authors believe that armed with this knowledge, banks have the ability to influence consumer spending by carefully analyzing the denominations of money that are distributed through ATMs.

STORY SOURCE: University of Iowa News Services, 300 Plaza Centre One, Suite 371, Iowa City, Iowa 52242-2500.

CONTACTS: Media: Media: George McCrory, 319-384-0012,; Program: Dhananjay Nayakankuppam, associate professor of marketing at the Tippie College of Business, 319-335-1981,