by Study Finds, Activist Post:
In an increasingly digital world, cash is becoming a relic of the past. With the rise of credit cards, mobile wallets, and Buy-Now-Pay-Later schemes, more and more consumers are ditching dollar bills for the convenience of cashless payments. However, this shift isn’t just about convenience – it may also be influencing how much we spend. A recent study sheds new light on the “cashless effect,” revealing that consumers tend to spend more when using digital payment methods compared to cash.
The findings, published in the Journal of Retailing, offer critical insights for retailers, policymakers, and consumers navigating our increasingly cashless society. Overall, going digital and no longer handing out physical currency leads to consumers spending more money than they would using cash. Interestingly, ditching cash isn’t great for everyone — especially service workers who rely on tips.
TRUTH LIVES on at https://sgtreport.tv/
“Against our expectations, we found that cashless payments do not necessarily lead to greater tips or donations, in comparison to cash,” says University of Adelaide PhD Student Lachlan Schomburgk in a media release.
“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.”
To unravel the complex relationship between payment methods and spending behavior, a team of researchers conducted an extensive meta-analysis, compiling data from 71 studies spanning over four decades. By synthesizing the results of these studies, which included data from over 11,000 participants and 338,000 transactions across 17 countries, the researchers were able to identify clear patterns and moderating factors in the cashless effect.
The meta-analysis looked at three key measures of spending: the total amount spent, the number of items purchased, and consumers’ willingness to pay. The researchers then examined how various factors, such as the specific features of cashless payment methods (e.g., credit cards vs. mobile payments), the type of purchase (e.g., hedonic vs. utilitarian), and broader economic conditions (e.g., GDP growth, inflation) influenced the magnitude of the cashless effect.
Results
The meta-analysis revealed a small but significant cashless effect, confirming that consumers indeed spend more when using digital payment methods compared to cash. However, the size of this effect varied considerably depending on several key factors.
Surprisingly, the study found no evidence that specific features of cashless payment methods, such as the ability to delay payment (e.g., with credit cards) or the transparency of the payment process, significantly impacted spending. Instead, the type of purchase played a crucial role, with the cashless effect being particularly pronounced for “conspicuous consumption” — purchases used to signal wealth or status.
Broader economic conditions also influenced the cashless effect, with the effect being stronger during periods of economic growth (i.e., increasing GDP) but unaffected by inflation rates. Interestingly, the study also found that the cashless effect has weakened over time, suggesting that as consumers become more accustomed to digital payments, the psychological impact on spending may diminish.
“The transition towards a cashless society seems almost inevitable. I believe this research is crucial because it shines a light on an overlooked aspect of this transition: how payment methods influence our spending behavior. This understanding can help empower us to make more informed purchasing decisions,” Schomburgk says.
