As society increasingly adopts cashless payments, new research led by the University of Surrey highlights the psychological benefits of using physical cash, suggesting it promotes more mindful spending habits.
As society transitions towards cashless payments, researchers led by the University of Surrey reveal that physical cash not only influences our spending habits but also instills a sense of psychological ownership that digital transactions lack.
A recent paper published in Qualitative Market Research explores how the decline of cash from daily life diminishes our spending awareness, often leading to impulsive purchases. The study raises the point that incorporating a physical element into our payment systems might be essential for encouraging responsible spending behaviors.
“The visceral nature of cash — its smell, feel and the act of counting it — creates an emotional connection that digital payments lack. When we handle cash, we are not just spending money; we are parting with a piece of ourselves,” lead author Jashim Khan, an associate professor of marketing and director of international business management at the University of Surrey, said in a news release.
The research, conducted in New Zealand in 2013 and China in 2023, used focus groups and open-ended questionnaires to capture rich, nuanced data on consumer experiences with both cash and cashless payment methods. The participants articulated their emotional and behavioral responses to different payment modes, offering insights into how physical money affects spending discipline.
In China, where 50% of transactions are now app-based, the participants reported a weakened sense of monetary ownership.
“Digital money doesn’t feel like spending your own money; there is no concept of money, but cash is different; it always feels like your money is decreasing when you use it,” one participant reported.
This sentiment mirrors findings in New Zealand, underlining cash’s emotional significance compared to digital payments.
The study further discovered that while people feel content and secure using third-party payment apps, they often experience a sense of loss when parting with cash. Emotional reactions to cash transactions include feelings of sadness and guilt, underscoring a deeper psychological connection to physical currency. In contrast, digital payments, with their intangible nature, frequently lead to unrestrained spending, as cash’s physical presence is replaced by abstract numbers on a screen.
“Our research shows that cash isn’t just money — it’s a way to stay connected to what we spend. Holding cash in our hands reminds us of its value, something that digital payments can make easy to forget,” Khan added. “As we use more cashless options, it’s worth remembering the lessons cash teaches about spending wisely. We’re not saying cash is outdated. In fact, we’re rethinking how we view and manage money as things change. Moving to a cashless society means we need to understand how different payment choices affect us, not just financially but emotionally. Knowing this can help us make better financial decisions in a world where money often feels invisible.”
This groundbreaking research comes at a pivotal time as the world rapidly adopts digital payment methods. It urges a reconsideration of how we engage with money in both tangible and intangible forms, highlighting the necessity to balance technological advancement with an understanding of the psychological impacts on spending habits.