-Cashless-A not so new trend.
-The emotional value of money
-Cognitive and impulsive buying behavior
-Cash helps ration spending
-Millennials – tech-savvy generations
-Cashless after COVID?
Cashless-A not so new trend.
Internet, digital wallets, e-payments, etc. all these terms don’t sound new. They have engulfed every inch of our life and currency is no exception. The consecutive appearance of bank cards, plastic money, mobile banks have eventually led to a crucial stimulus of reaching the destination of a cashless society. By this time we are already aware of how beneficial being digital is in terms of convenience, discounts, etc. and also about some of its drawbacks. Now, we are in a position to analyze some small and big changes it inculcated in us emotionally and psychologically.
Is there a link between the cognitive and emotional associations that everyone has with specific payment modes and their choice of mode of payment?
The emotional value of money
As a kid – getting a hundred rupees note from my uncle for my birthday gave great joy. Getting hundred rupees into your bank account doesn’t have the same value. Let us discuss the perceptions of cash payments as “painful” when compared to cashless payment methods. Parting with physical money and the ability to determine the amount spent in a transaction somewhere causes the “pain of paying” as a degree of annoyance in our subconscious state of mind. The psychological reason paper money is revered more than plastic money is due to the ability to keep a check on our spending habits. Cash allows us to set a pre-determined budget allowed to spend over a particular period with no encounters of alternative payment sources.
Cognitive and impulsive buying behavior
Many research states that payment in cash gives us the highest pain of payment as compared to any other mode of payment because cash is something we can actually see, touch, and count physically unlike others whereas when we buy something with cash we immediately know what proportion that thing goes to costs us within no time. Also, it’s being feared that heading towards cashless can make it difficult for individuals to exercise their self-control and would remove stops on consumer spending.
At times buying things we want can make us happy and less stressed at least for a moment but this pleasure and satisfaction will be short term having its long term consequences we never get to know whether it is financial, emotional, and psychological. Most of the time we don’t know exactly how much we have in our savings or credit account, though we may have a rough idea, it requires effort to check our debit or credit card balance but looking into our wallet’s status requires next to no cognitive effort. So, when you hand over your card, you don’t see the money disappear from your account (at least in any concrete way), which returns us to the earlier idea that paying for something causes a sense of “pain”, and paying with cash hurts quite more than paying with a card.
Cash helps ration spending
It is always easy to swipe & spend without feeling that you are overspending. But, when you pay in cash, emotional attachment to money is more making more conscious when we make a purchase. Having to part with cash can help prevent impulsive purchases. This leads to the belief that the use of payment cards requires mental budgets to be set, which causes high freedom to spend more than the pre-set limit. The preference of cash is to refrain from overspending and to keep an insight into the volume of spending tangible money is linked with emotional meaning to the consumer which develops an attachment, this can cause consumers to hold on to physical cash and have a check on their spending and saving patterns.
Millennials – tech-savvy generations
The younger generation is said to be embracing the cashless society .The younger generation are believed to be at the point of entry to new technologies as they have been born into the time with increased levels of innovation, resulting in new and improved technologies. On the contrary, the older generation try to resist the coming cashless society, as they strongly believe that with boons, banes also exists because no matter how easy and convenient financial processes have become, threat of security has also increased.
Cashless after COVID?
Necessity over convenience – The pandemic is driving adoption of contactless payments in a major way. COVID-19 reduces the use of cash as many retailers now sell exclusively through online payments. The new virus fears could be enough introduce mobile payments to those who to otherwise didn’t see the appeal. A growing number of people and businesses worldwide have stopped using paper money for fear it could carry the virus. Some analysts believe the COVID-19 pandemic is accelerating a shift towards a wholly cashless society. Meanwhile, for those confined to their homes, online shopping is a lifeline.
People are adapting to the new normal- Cashless trend is likely to be accelerated by the Coronavirus as people starts avoiding unnecessary physical transactions. Luckily, we have the much required infrastructure already to shift from physical to digital modes of transaction. This could be the push needed to become truly cashless. I would not have thought of this point before 2020, but it could be relevant for quite a few years. So, the moral to all of the STORY – how much you spend is always somewhere linked to how you spend.
Keywords- E-payments, Cognitive, Impulsive, Buying behavior, Digital wallets, Millennials, COVID’19, Cashless, Plastic money.