Rapid advancements in financial technology point to a future where our money lives in the digital realm. But, many proponents of cash argue that cash offers psychological feedback — it “hurts” when you see money leave your wallet. A recent experience tells me that, in the future, we will be able to feel the pain of spending, even if it’s through electronic payment methods.
During a family gathering, I had the opportunity to play the classic board game Monopoly with a couple of my cousin’s kids. (It was the electronic-banking edition, where players are issued credit-card sized plastic cards to hold their Monopoly funds. Funds are added, deducted and transferred by inserting the the cards into a handheld gizmo — much like a transaction with a debit card at the ATM.)
The initial turns were uneventful as we made our first trip around the board before we could buy property. Soon, we each had a few properties in our possessions. Then, one child — Collin, 5 — stopped buying open properties that he landed on, which is pretty much a sin in the game of Monopoly.
Collin’s father stopped by to watch him play and realized that Collin wouldn’t buy open properties. “Collin, why are you not buying those pieces?” his father asked. “I don’t want to,” responded Collin. “You have to buy to win,” his dad insisted. “But, I don’t want to lose my money!” Collin answered, almost about to cry as he clutched his Monopoly card.
Everyone else chuckled as they watched the scene unfold. Not surprisingly, Collin deserted the game for his Legos.
When it comes to the psychology of money, Collin’s reaction offered a glimpse of how younger generations are likely to interact with money in the electronic age. His ability to feel the pain of spending, with digital money, contradicts scientific studies that conclude that we tend to spend less when we use cash.
In a 2008 report published by the American Psychological Association, researchers found that study participants were more susceptible to the “pain of paying” when the payment outflow was more transparent (such as with cash).
“People are willing to spend (or pay) more when they use a credit card than when using cash,” the authors wrote.
Movenbank, a financial startup that aims to introduce mobile-only banking, recognizes the importance of the “pain of paying” and emphasizes the use of real-time changes in account balances to remind customers that they are spending money.
However, today’s youth is growing up in a different time. They beat Angry Birds before they could write a proper sentence. They’re more familiar with digital currency than physical currency, unlike the older generations that have it the other way around.
If future generations behave much like Collin, it’s a good sign. They won’t overspend in a world of electronic money.