Cash Reigns: Uncovering the Unexpected Facts About Spending Habits in a Cashless Society
New findings from the University of Surrey demonstrate that physical cash not only impacts our spending habits but also instills a deep sense of psychological ownership that digital payment methods lack.
A study published in Qualitative Market Research reveals that as cash usage declines, so does our awareness of our spending, leading to increased impulsive and unnecessary purchases. The research indicates that incorporating a tangible element in payment methods is crucial for encouraging responsible spending practices.
Dr. Jashim Khan, an Associate Professor of Marketing and Director of International Business Management at the University of Surrey, and the study’s lead author stated:
“The tangible aspects of cash—its texture, aroma, and the process of counting—forge an emotional bond that is absent in digital payments.
“When handling cash, we’re not merely exchanging money; we’re giving away a piece of ourselves.”
The research was conducted across two distinct cultures at different times—New Zealand in 2013 and China in 2023. Through focus groups and open-ended surveys, the team collected extensive data regarding consumers’ experiences with both cash and cashless payment systems. Participants shared their emotions and behaviors related to various payment methods, revealing that cash usage heightens their awareness of spending, whereas cards and apps often result in a disconnection from their financial outlays.
Despite 50% of transactions in China being processed via app-based payments, participants reported feeling less ownership over their finances. One participant remarked, “Using digital money doesn’t feel like spending your own funds; there’s a lack of connection to the money, while cash feels different; you always sense a reduction in your funds when using it.” This feeling resonates across both studies, emphasizing the emotional significance that cash holds in comparison to digital transactions.
The findings also indicated that while many feel happy and secure using third-party payment applications, they sometimes experience a sense of loss when exchanging cash. Emotional reactions to cash transactions can include feelings of sadness and guilt, reflecting a deeper psychological tie to physical money. Conversely, the convenience of digital payments often leads to impulsive spending, as the physicality of cash is substituted with abstract figures on a screen.
Dr. Khan adds:
“Our research illustrates that cash is more than just currency—it’s a means to connect with our spending habits. Holding cash reminds us of its worth, a notion that digital transactions can easily obscure. As cashless methods become more prevalent, we should take into account the valuable lessons cash imparts about prudent spending. We’re not suggesting that cash is obsolete; rather, we are reevaluating our perspectives on money management during this transition. Adopting a cashless society necessitates an understanding of how various payment options influence us not only financially but also emotionally. Being aware of this can empower us to make more informed financial choices in an increasingly intangible monetary landscape.”
