Digital payments making people more prone to spending on luxury items, jewellery: Study

With cash transactions taking the back seat and digital payments becoming more and more common in developing and developed nations, the spending behaviour of people has significantly changed. Researchers from the University of Adelaide and the University of Melbourne in Australia have concluded that digital payments are driving people to spend more as there is no physical exchange involved. The researchers conducted the study by doing a meta-analysis of 71 previously published papers and by observing the spending behaviour of people across 17 nations.

The experts concluded that the convenience in spending has made people more prone to spending on luxurious items that are most of the time unnecessary.

They advised people to carry cash as it helps as a self-control mechanism.

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"To prevent spending more than planned, we recommend consumers carry cash instead of cards whenever they can, as it acts as a self-control method," said researcher Lachlan Schomburgk.

"When using cash, people physically count and hand over notes and coins, making the act of spending more salient. If nothing is physically handed over, it's easy to lose track of how much is spent," he added.

The link between high spending and digital payments has been visible for a long but it’s the first time that the spending behaviour of people has been tracked at this scale, further cementing the previous theories.

The scientists revealed that the difference in spending was "small, but significant". People with access to digital payments were more likely to spend money on luxury clothing and jewellery.

They also observed that digital payments did not affect tips or donations. People spend money on donations as much as they used to do with cash.

"Against our expectations, we found that cashless payments do not necessarily lead to greater tips or donations, in comparison to cash," said Schomburgk.

Furthermore, researchers found a link between better economic conditions and greater digital payment acceptability.

"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 behaviour," Schomburgk concluded.

(With inputs from agencies)