How Australia’s move to a cashless society is damaging millennials

Apple Watch making a contactless payment. (Source: Apple)

An Australian fintech founder claims that the move towards a cashless society is harming consumers, especially millennials who lose track of how much they’re spending.

Co-founder of Sydney startup Carrots Money, Jacqueline Park, says not physically handling money makes it too easy to spend excessively.

“Things like contactless pay and Afterpay are making spending money really, really easy. We’re removing money from the physical world. We’re harming our long term freedom,” she told the Intersekt conference last month.

Visa recently revealed that contactless payments have now reached an all-time high in Australia, with 92% of its face-to-face transactions via that method.

The credit card company also reported that two Australian cities, Sydney and Canberra, the only ones covered in the global research, are ahead of New York, San Francisco, Singapore and Berlin in the adoption of electronic payments.

Park’s theory that the cashless trend is harming consumers is supported by a University of Sydney study this year showing people spend up to 50% more when they don’t use cash.

“There’s good empirical evidence that people spend more money when they don’t actually have to use cash, and that goes across different alternative forms of payment,” Sydney University professor of marketing and behavioral psychology Donnel Briley told Fairfax at the time.

Contactless “tap and go” and mobile payments subconsciously detach consumers from their money. The non-cash payments make spending feel “not real”, and makes each person’s “mental accounting” a lot more inaccurate.

“There’s good evidence that when people are spending in cash the mental accounting is quite specific, and they do think about the fact they’re making a trade-off… that they’re spending $20 here and they cannot spend it on some other alternative.”

“When people are spending electronically, they are less likely to make that categorisation in terms of those mental accounts.”

Park said that her personal “spending coach” app is attracting an increasing number of young people who are more used to turning to technology for help than real-life advisors.

“95% of millennials are not advised, but recent study from KPMG showed 55% to 65% want specific help in managing their cash flow,” she said.

“With technology, the expectations of things being just better, faster, easier and more personal, more beautiful – that is just the growing expectation and millennials are more comfortable with adopting technology so the demands are coming to us faster.”