Physical cash does not merely influence our spending habits but engenders a profound sense of psychological ownership that digital payments fail to replicate. Research from the University of Surrey illuminates this phenomenon.

A paper in Qualitative Market Research discusses how the gradual disappearance of cash from our wallets correlates with diminished spending awareness. This trend encourages more impulsive and unnecessary purchases. The findings highlight the importance of retaining a tangible element in our payment systems to foster responsible spending behaviours.

Dr Jashim Khan, Associate Professor of Marketing and Director of International Business Management at the University of Surrey and the study’s lead author emphasised the tangible aspects of cash, which create a unique emotional bond that digital payments lack. He noted, “The visceral attributes of cash — its distinct smell, texture, and the very act of counting it — forge an emotional link absent in digital transactions. Handling cash is not merely a financial transaction; it feels like parting with a piece of oneself.”

The research team conducted their study across two culturally diverse contexts and markedly different times—New Zealand in 2013 and China in 2023. They employed focus groups and open-ended questionnaires to obtain detailed insights into consumer experiences with cash and cashless payment methods. Participants described their feelings and behaviours associated with various payment modes, revealing that cash usage promotes a heightened awareness of expenditure. Conversely, using cards and apps often results in a disconnect from the actual money spent.

A diminished sense of financial ownership was commonly reported in China, where app-based payments account for 50% of transactions. One participant observed, “Digital money doesn’t truly feel like spending one’s own money; it lacks a tangible concept of money. However, with cash, there is always a palpable sense that your funds are depleting.”

This sentiment was consistent across both studies, underscoring the emotional impact of cash compared to digital alternatives. Furthermore, the research revealed that while digital payments are associated with feelings of happiness and security, they sometimes lead to a sense of loss when cash is used. The emotional reactions to cash transactions—such as sadness and guilt—reflect a more profound psychological connection to physical money. In contrast, the convenience of digital payments often results in mindless expenditure as the tangible aspect of cash is substituted with mere numbers on a screen.

Dr Khan added, “Our findings demonstrate that cash is more than just money; it is a reminder of the value of what we spend. Holding cash makes its worth more perceptible, a reminder that is easily forgotten with digital payments. Recalling the lessons cash teaches us about prudent spending is crucial as we gravitate towards more cashless options.

We’re not suggesting that cash is becoming obsolete. Instead, we are re-evaluating our relationship with money in the face of evolving financial landscapes. Transitioning to a cashless society necessitates a deeper understanding of how different payment methods impact us financially and emotionally. Such awareness can guide us to make wiser financial decisions in a world where money often seems invisible.”

More information: Jashim Khan et al, Money you could touch: cash and psychological ownership, Qualitative Market Research An International Journal. DOI: 10.1108/qmr-04-2023-0049

Journal information: Qualitative Market Research An International Journal Provided by University of Surrey