Going cashless leads people to spend more money

By Study Finds

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.

“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.


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.

The findings of this meta-analysis have important implications for retailers, policymakers, and consumers alike. For retailers, the results suggest that accepting and encouraging cashless payments can boost sales, particularly for luxury or status-driven purchases. However, as the cashless effect weakens over time, retailers may need to find new ways to capitalize on the psychological impact of digital payments.

“Businesses should be aware that if they fail to embrace the cashless revolution, they might be unintentionally jeopardizing their revenue potential,” Schomburgk warns.

For policymakers, the study highlights the need to consider the unintended consequences of a shift towards a cashless society. While digital payments offer many benefits in terms of convenience and efficiency, they may also encourage overspending, particularly among vulnerable consumers. Policymakers may need to consider measures to protect consumers and promote financial literacy in an increasingly cashless world.

Finally, for consumers, the meta-analysis serves as a reminder to be mindful of how payment methods can influence spending behavior. By being aware of the cashless effect and taking steps to manage spending, such as setting budgets or using cash for certain purchases, consumers can take control of their financial well-being in a digital age.

StudyFinds Editor Chris Melore contributed to this report.

StudyFinds sets out to find new research that speaks to mass audiences — without all the scientific jargon. The stories we publish are digestible, summarized versions of research that are intended to inform the reader as well as stir civil, educated debate.

Source: Study Finds

Top image caption and credit: “Cashless payments do not necessarily lead to greater tips or donations in comparison to cash,” researchers report. (Photo by Sam Dan Truong on Unsplash)

Become a Patron!
Or support us at SubscribeStar
Donate cryptocurrency HERE

Subscribe to Activist Post for truth, peace, and freedom news. Follow us on SoMee, Telegram, HIVE, Minds, MeWe, Twitter – X, Gab, and What Really Happened.

Provide, Protect and Profit from what’s coming! Get a free issue of Counter Markets today.

Activist Post Daily Newsletter

Subscription is FREE and CONFIDENTIAL
Free Report: How To Survive The Job Automation Apocalypse with subscription

Be the first to comment on "Going cashless leads people to spend more money"

Leave a comment