The move away from cash is leading to more impulsive and unnecessary purchase decisions, a new study has found.
Research from the University of Surrey found that physical cash produced a sense of “psychological ownership” of spending that was not replicated in online money transfers.
Dr Jashim Khan, the university’s Director of International Business Management, said cash was more than just a representation of monetary value.
“The visceral nature of cash – its smell, feel, and the act of counting it – creates an emotional connection that digital payments lack,” he said.
“When we handle cash, we are not just spending money; we are parting with a piece of ourselves.”
A paper published in Qualitative Market Research, says that as cash declines, so does the awareness of spending and some of our spending restraint.
It argues that maintaining a physical element in payment systems may be necessary to promote responsible spending behaviours.
Dr Khan said holding cash in our hands reminded us of its value, which helped to remind us to spend wisely.
“Moving to a cashless society means we need to understand how different payment choices affect us, not just financially but emotionally,” he said.
“Knowing this can help us make better financial decisions in a world where money often feels invisible.”
The research team conducted their study in New Zealand and China.
One of the participants said that digital money did not feel like your own money and cash felt like it was decreasing as you spend it.
“Emotional responses to cash transactions include sadness and guilt, reflecting a deeper psychological connection to physical money,” the study report said.
“In contrast, the ease of digital payments often results in mindless spending, as the tangibility of cash is replaced by abstract numbers on a screen.”
The full report is on the University of Surrey website.
