How a cashless economy might be bad for your waistline 16



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In early May, 2015, news services reported that Denmark would allow retailers to only offer card payment and allow them to ban cash as a means of transaction.

For quite a while, Scandinavia has been all about a cashless society. Sweden has taken it one step further with a vein scanner, where consumers can pay for their coffee by entering the last four digits of their mobile phone number into a sensor that scans their veins – presumably to see if they have Black, Platinum, Gold, Silver, or just boring old red blood.

But, will we ever see Australia go completely cashless?

I don’t think so. While Australians are also pretty good at adopting new technology, we are also pretty good at not giving up the old stuff. Prospect theory, which tells us that we value losses more than we value gains, would suggest that we are unlikely to give up the perceived usefulness of cash, at least in the short-term.

That said, at an incremental level, we are using our cards more and more, particularly in relation to the swipe and go PayWave and PayPass technology. According to a Westpac forecast made in 2014, there would be almost $3 billion in contactless transacations in Australia in 2015.

But, there are other reasons why we should be hesitant to give up cash totally, and these tend to be directly related to the hip-pocket nerve – well, kind of.

Research in psychology and neuroscience has suggested that there is a kind of emotional competition between the immediate pleasure of buying something, and an equally immediate pain of paying for that something.

A 2007 study published in the journal Neuron, found that the region of the brain associated with pain processing (the bilateral insula) activated when participants saw prices that were too high.

In the study, people were placed in an fMRI machine, given $20 cash and given the opportunity to buy something. What the researchers found was that the handing over of cash caused a sense of pain for them, or at least that’s what was observed happening in the brain.

We already know a lot of this from psychological experiments which show we have a tendency to “couple” or clump bits of information together in our minds. So, when we buy something with cash, we know straight away how much that thing is going to cost us. We also know that we no longer have that amount of money in our wallet or purse.

But when we use a plastic card, we are, ostensibly handing over something quite abstract. Whether it’s debit or credit, there is a degree of psychological and temporal distance. Most people don’t know exactly how much they have in their savings or credit account; they might have a general idea, but you can see that it is not the same as cash. It requires effort to check your credit or debit card balance, but looking in your wallet, as you are paying, 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), and therefore, feel like you’ve lost anything. You’re also creating a kind of abstract distance between the payment of the bill, and the usage of the money that you have. And that is sometimes extended even more if you don’t actually get the bill for months after you have spent the money and consumed the product.

In addition, research tells us that people are more likely to buy unhealthy food, on average, when they pay using cards, as opposed to using cash. A study published in the Journal of Consumer Research in 2010 analysed the shopping behaviour of 1,000 households over a period of six months and found that using debit and credit cards led to a small, but statistically significant, increase in impulsive purchases of unhealthy products.

In one of the experiments, participants spent 40% more on “vice” product (such as chocolate biscuits or frozen cheesecakes) when they were using credit cards, than cash. The mode of payment didn’t affect the amount spent on “virtue” products (such as rolled oats).

The researchers even classified different types of spenders as “tightwads” and “spendthrifts”, and found that “tightwads” were likely to spend 56% more on impulse products when they used credit, than when they used cash. They also found that participants also thought “less” about their product when they chose vice products.

But, there is nuance in these broad findings. A different study found that if people were buying indulgent food such as chocolate cake for immediate consumption, the pain of using cash was offset by the excitement and anticipation of eating the delicious, exciting food.

So, the greater the pain of payment, the more we were to choose foods that we wouldn’t normally consider as part of a healthy diet, but only if we plan to eat them straight-away.

In one of the experiments, the researchers created a cafe afternoon snack menu, and found that people who paid with cash consumed close to 80 more calories than those who used a card. People who paid with cash consumed products higher in total fat (3g, or 15% more), salt (130 mg, or 17%), carbs (8g, or 13%) and sugar (1.5g or 6%), than those who used a card to pay.

Which returns us to the earlier idea that paying for something causes a sense of “pain”, and paying with cash hurts more than paying with a card. People are offsetting that pain by treating themselves to make themselves feel good after the trauma of spending money.

So, the moral to all of these stories? Put a freeze on your cards (maybe literally – stick your cards in the freezer for month and see how much you spend), don’t go shopping when you are in an fMRI machine, and eat more chocolate biscuits (well, that’s my interpretation of the findings).

The Conversation

By Paul Harrison, Deakin University

Paul Harrison is Senior lecturer, Deakin Business School at Deakin University.

This article was originally published on The Conversation.
Read the original article.

Guest Contributor

  1. Seriously – working with cash can help you budget better. You can put aside for big/infrequent expenses. You can economise or do without if you are short of cash.

    1 REPLY
    • Absolutely right. We did better when hubby was paid in cash. He’d bring it home, lay out the bills and put the right amount of money on each and the standard housekeeping money. What was left he’d divide between us. I can still see him standing there with a fifty in his hand saying how come this is left over?You haven’t allowed for piano lessons – and it was all gone. We didn’t owe anything then, just the house. And along came credit cards……

  2. Black markets won’t let it happen methinks. Ha ha see the drug dealers with portable card machines. Not to mention plenty tradies still
    Like cash in hand.

  3. They can wait for another 23 1/2 years before they go cashless, that’s about when I’ll be departing this earth

    2 REPLY
    • I prefer cash thus knowing exactly what have to spend or not. However Credit cards are great and have a place, as long as control spending and able to pay off every month.

  4. I don’t trust the card revolution and always keep a small amount of cash on me for when the electronics aren’t working.

  5. When the big earthquakes hit Christchurch NZ in 2011 all card pay systems stopped for a variety of reasons. Big supermarkets were closed. People who had cash could still by food etc at small dairies for example. Our electronic world will not stop major disasters, be it earthquakes, floods or cyclones.

  6. Cards now used mostly,but always need some cash on you & will be richer as harder to part with cash…

  7. Mkke here-yep let’s give up using cash, let’s all use cards. The banksmae $12b in csrd fees last year.

  8. Having cash is a good feeling ,you know exactly what to put away for accounts ,you don’t have any bills coming in ,because you have already paid them. Then whatever you have over is yours ,Credit card,just buy what you want.and then find you are in Dept ,

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