An increasing number of people are now using cashless payment methods such as credit cards and mobile apps, leading to changes in consumer habits. However, issues related to excessive consumption have also emerged. A recent study conducted by a university in the UK has shown that physical cash not only affects our spending amounts but also helps consumers develop better financial management and consumption habits.
A survey in 2022 revealed that in European and American countries, 56% of people primarily use financial or credit cards for transactions, while in countries like Japan, 51% opt for cash transactions. However, the proportion of cash transactions is rapidly being replaced by electronic payment methods such as credit cards and mobile apps, with a significant increase during the pandemic period due to fears of contagion driving more people towards cashless payments.
The research team at the University of Surrey in the UK conducted studies on cash and electronic payments among people from two different cultural backgrounds, New Zealand and China. The results indicated that physical cash had a more positive impact on people’s consumption behaviors compared to electronic payments, with cash payments offering several irreplaceable advantages.
The study involved group discussions and open-ended surveys in New Zealand in 2013 and China in 2023 to gather detailed insights on people’s preferences for cash and cashless payment methods. Participants were asked to describe their experiences using various payment methods during the surveys.
In New Zealand, 31 adults aged between 25 to 45 participated in five group discussions and completed open-ended questionnaires. In China, a similar approach was adopted with 180 participants aged between 18 to 54, evenly split between genders. Among them, 60% primarily used third-party app payments, while the remaining 40% utilized a mix of cash, credit cards, and third-party app payments.
The choice to study these countries was based on the large population base in China, where the growth rate of app payments was significantly faster, with a high adoption rate of 50%, surpassing many other nations. In contrast, New Zealand was selected due to over 70% of people using credit cards for consumption payments back in 2013.
The results indicated that using cash can heighten individuals’ awareness of their spending habits. Conversely, those who used credit cards, apps, and other electronic payment methods experienced weakened financial awareness and a reduced sense of ownership after making transactions, leading to impulsive spending behaviors.
While some people perceive electronic payments as safer and more convenient than cash transactions, allowing them to track their spending locations accurately, they are also concerned about the potential risks of hackers gaining access to their accounts or passwords, resulting in significant losses.
Researchers noted that the study results aligned with previous research findings, suggesting that human reliance on physical currency is unlikely to diminish entirely. The emotional connections people have with physical money, which triggers feelings of sadness and guilt when using or losing cash, highlights the deep psychological link between humans and physical currency.
Although many individuals feel happy, confident, and secure when using apps for payments, foregoing cash can evoke negative emotions such as sadness and guilt. The convenience of digital payments may lead to impulsive spending since the tangible nature of money is replaced by electronic digits on screens, reducing the physical perception of currency.
Given that this study was conducted across two vastly different countries, New Zealand and China, and over a significant time frame, potential biases in the results were acknowledged. Future research may explore background groupings to examine the relationships between cash and cashless payments among individuals from diverse cultural and socio-economic backgrounds, providing further insights into the current psychological state of consumers.
The main author of the study, Dr. Jashim Khan, an associate professor of marketing and director of the International Business Management Department at the University of Surrey, emphasized the emotional connection people have with physical money compared to digital payments. He highlighted that cash is not just a form of currency but a means of maintaining a close relationship with our spending. Dr. Khan suggested that understanding how money influences our financial and emotional well-being can aid in making better financial decisions in an increasingly complex world.
The research findings were published in the October issue of the Qualitative Market Research journal.