Cashless payments increase spending

People who use cashless payment methods spend more than those who use more cash, according to an Australian study. However, this does not translate into more tips or larger donations.

In a meta-analysis, researchers from the University of Adelaide in Australia reviewed 71 published and unpublished research papers from 17 countries, including data on payment methods from more than 11,000 participants. In addition to cash, they looked at card payments, mobile payments, buy-now-pay-later methods, checks and online payments, among others.

– Through this meta-analysis, we identified key factors that make the cashless effect stronger or weaker, which individual studies could not find. This gave us new insights that other researchers had often missed in individual studies, PhD student Lachlan Schomburgk told Phys.org.

The analysis, published in the Journal of Retailing, shows that cashless payments generally lead people to spend more money compared to using cash. This is especially true when it comes to big-ticket items such as jewelry. However, when it comes to tips and donations, it did not lead to larger amounts, according to the researchers.

– This suggests that traditional cash-based methods of collecting money, such as tip jars and spiral wishing wells, are just as effective as cashless POS terminals for collecting tips or donations.

In addition, people are encouraged to use cash to reduce their spending because it acts as a kind of automatic “self-control” method.

– When you use cash, you are physically counting and handing over notes and coins, which makes it more obvious that you are spending your money, he says.

Schomburgk says the trend toward an even more cashless society may be difficult to stop, but that this kind of research is “crucial” because it sheds light on how payment methods affect shopping behavior.

– This understanding can help us make more informed purchasing decisions, he notes.