Consumers tend to spend more money when using cashless payment methods rather than traditional cash, Australian university researchers revealed.
In the paper, the authors noted that 40 years of research links cashless payment methods, such as credit cards or Apple Pay, to higher consumer spending. This is also referred to as the “cashless effect.”
“I believe this research is crucial because it shines a light on an overlooked aspect of this transition: how payment methods influence our spending behaviour,” said lead author Lachlan Schomburgk, a Ph.D. student at the University of Adelaide.
Carry Cash for ‘Self-Control’
Mr. Schomburgk recommended carrying cash, as it can help prevent losing count of the amount being spent.
“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,” he said.
What Influences The Cashless Effect?
The paper used meta-analysis to identify key factors that make the “cashless effect” stronger or weaker.
It found that people spend more with cashless methods especially when buying products that signal status, like jewellery, and during positive periods of the business cycle, such as an increasing GDP growth rate.
However, researchers found that the cashless effect has “weakened over time” as people are increasingly familiar with non-cash methods.
Researchers also didn’t observe the cashless effect in the case of tipping.
“This indicates that traditional cash-based ways of collecting money, such as tipping jars and spiral wishing wells, are just as effective as cashless point-of-sale terminals to collect tips or donations.”
The professor also noted that buy-now-pay-later services and cryptocurrency payments are likely to influence payment behaviour in the future.
Cashless Society ‘Almost Inevitable’
At the same time, Mr. Schomburgk said the transition to a cashless society is “almost inevitable” in the future.
If businesses “fail to embrace the cashless revolution,” they might be unintentionally impacting revenue potential, he argued.
Keeping Cash Bill Introduced Into Parliament
Australia is currently among the frontrunners of digital payments globally, but some have expressed concerns about the move to a cashless society.
He said the bill will legislate that businesses operating in face-to-face settings must accept cash payments for transactions under $10,000 (US$6,667).
“The bill provides for maximum civil penalties of $5,000 for individuals and $25,000 for companies. It should be noted that they are civil penalties as opposed to criminal penalties,” he said.
Mr. Gee noted many senior Australians “simply do not want to use cards for their transactions.”
“Not everyone is able to use online banking services. Many find managing accounts and cards online to be stressful, and confusing,” he said.
Katter Australia Party Member for Kennedy Bob Katter seconded the bill, noting the main point of the bill is, “do you want your bank manager to decide whether or not you can buy a loaf of bread?”
“There is no doubt that we’re running pell-mell into some sort of dystopian society in which a handful of people control every aspect of our lives,” he said.
“And [the bank manager] might think it’s good not to cash your cheques or allow you to use your card,” Mr. Katter added.
