Cash has been a staple of transactions for millennia, but the rise of electronic payments (cashless payments) is reshaping spending habits, according to a comprehensive meta-analysis conducted by researchers from the University of Adelaide and the University of Melbourne.
The study examined 71 previously published papers from 17 countries to explore the impact of cashless payments on consumer spending behaviours. Researchers discovered a notable trend: using electronic methods like cards or mobile payments encourages higher spending compared to traditional cash transactions.
BEHAVIORAL INSIGHTS
“When using cash, people physically count and hand over notes and coins, making the act of spending more salient. If nothing is physically handed over, it’s easy to lose track of how much is spent,” explains Lachlan Schomburgk, a marketing researcher from the University of Adelaide. This phenomenon suggests that the absence of physical money may diminish consumers’ awareness of their spending limits, leading to more lenient budget adherence.
IMPACT ON SPENDING HABITS
The meta-analysis found that the difference in spending between cash and cashless methods, while small, was statistically significant. This effect was more pronounced in “conspicuous consumption,” where consumers tend to spend more on status-signalling items like luxury goods.
INSIGHTS ON DONATIONS AND TIPS
Interestingly, the study also observed that cashless payments did not necessarily lead to higher tips or donations compared to cash transactions. This finding contrasts with the general trend of increased spending and suggests nuanced differences in spending behaviour across different transaction types.
ECONOMIC CONDITIONS AND CASHLESS IMPACT
The researchers noted a correlation between positive economic conditions and the heightened effect of cashless payments on spending. However, this impact slightly diminished over time, indicating a habituation effect as electronic payments become more prevalent.
FUTURE DIRECTIONS
Future research avenues could explore whether specific types of cashless payments, such as credit cards versus mobile wallet apps, influence spending differently. Additionally, investigating emerging technologies like crypto currencies and buy-now-pay-later services will provide further insights into evolving consumer behaviours.
THE PATH TOWARDS A CASHLESS SOCIETY
“As the world moves towards a cashless society, understanding how payment methods influence spending behaviour becomes crucial,” emphasizes Schomburgk. This knowledge empowers consumers to make informed decisions and highlights the need for ongoing research into the implications of payment innovations on personal finance.
