Why Britain has fallen out of love with cash

When credit cards replaced cash as the most common payment method behavioural economists recognised that people were spending more. They argued that payments with cash had been inducing a psychological pain, associated with the visibility of the physical reduction of money in the wallet.

Credit cards on the other hand were associated with ease and rewards. Some popular credit card reward programmes include air travel miles, cash back on purchases, gift cards and even insurance on rental cars. Those potential benefits, coupled up with the intangibility of the money being spent made credit cards the perfect way to guilt-free spend.

In 2007 came the contactless payment method, whereby cards are simply presented at the chip and pin machine, removing any hassle or mental effort required by entering a pin. For the consumer, this further increases the transaction ease, and the psychological distance from the monetary exchange, potentially increasing willingness to spend. However, for security purposes, spending was limited at £30 per purchase.


But what if there was a contactless payment method allowing for unlimited spending? In 2014, Apple launched Apple Pay, whereby their devices with fingerprint recognition technology could be used in the same way as contactless cards, but with no spending limit. All that is required of the consumer is to present their device whilst authorising the purchase with their fingerprint. Since then this technology has been developed further to allow for the authorisation of purchases through face recognition.

Does this payment method make spending money even easier? Some behavioural economists suggest that it will change the way our brains think about buying things. Consumers will no longer need to carry their wallet, so will be completely disconnected from their mental accounts. They may even associate payments with feelings that they tend to associate with using their smartphone, such as comfort, enjoyment, security or community.

We carried research with 1,000 shoppers who had spent money on their visit to a major shopping destination in the run up to Christmas. We found that on average almost of half of money spent was through a non-contactless card payment, a third via contactless and only 17% of purchases were made with cash. In comparison, the 2006 UK Payment Markets Summary report by Payments UK showed that 62% of all payments in the UK were by cash, suggesting a significant change in the way we behave at the till over the past 13 years. We also analysed our data based on age range and found that those aged 18-25 are more likely to use contactless card payments than non-contactless, and it is the 36-45-year olds who use smartphone payments the most out of all age groups, but still prefer to use a card. Smartphone payments were generally low in reported numbers, suggesting a slow adoption of the technology, potentially due to security concerns.

Emotional Logic can help you pinpoint any psychological factors or barriers that may be impacting how much consumers spend on your brand and help you to overcome them – contact us for more information.

Date

January 10, 2019

Category

Consumer Research, Consumer Trends, Emotions, In-store, Millennials, Retail, Shopper Research

Tags
consumer trends, emotional logic, retail, shopping, young shoppers