According to a study conducted by the University of Adelaide, individuals have a tendency to spend more when making purchases using cashless methods of payment.
Lachlan Schomburgk, a PhD Student at the University of Adelaide who spearheaded the research, found evidence supporting the presence of a positive “cashless effect.” This effect causes consumers to spend more when using cashless payment methods as opposed to cash.
The study indicates that the cashless effect influences people to spend more.The study found that people are more likely to spend more when buying items that are usually associated with status, like jewelry. However, this effect was not seen when giving donations or tips. “Contrary to what we expected, we discovered that electronic payments don’t necessarily result in higher tips or donations compared to cash,” said Schomburgk, who conducted the research with Professor Arvid Hoffmann from the University of Adelaide and Dr. Alex Belli from the University of Melbourne. “This suggests that traditional cash-based methods of collecting money, such as tip jars and spinning wishing wells, are just as effective as cashless point-of-sale terminals for collecting tips.”s or donations.”
Schomburgk suggests that consumers should consider the payment method they choose when making purchases, as it can help them to spend less money, which is especially important during the current cost-of-living crisis.
To avoid overspending, consumers are advised to use cash instead of cards whenever possible, as it serves as a form of self-control,” Schomburgk explains.
“When using cash, people are more aware of the amount they are spending because they physically count and hand over notes and coins. This makes the act of spending more noticeable. On the other hand, when no physical exchange occurs, it is easy to lose track of spending.”The move towards a cashless society appears to be almost unavoidable. It is important to research how payment methods affect our spending habits, as this can help us make better purchasing decisions. The study, found in the Journal of Retailing, also offers valuable insights for businesses and policymakers. According to Schomburgk, businesses need to be aware that not adapting to the cashless revolution could harm their potential earnings, and policymakers should take note of this research.
It is important to communicate with people who may not be familiar with cashless transactions, such as those without bank accounts, about the potential for cashless methods to result in overspending.
Schomburgk emphasizes the need for further research, as technological advancements are giving rise to new payment methods.
“Both buy-now-pay-later services and cryptocurrency payments have unique features that are likely to have an interesting impact on payment behavior,” Schomburgk explains.
“Due to their novelty, there is currently limited academic research on both, which is where I believe future research is needed.
This study was carried out by examining 71 published and unpublished research papers from 17 different countries, using data from over 11,000 unique participants.
“Through this meta-analysis, we have discovered important factors that contribute to either strengthening or weakening the cashless effect, which individual studies were unable to uncover. In doing so, we have revealed new insights that were often overlooked by other researchers conducting individual studies,” Schomburgk explains.
