The UK is on the way to becoming a cashless economy, debit card payments have finally eclipsed cash use for the first time, as reported this week on the BBC.

A total of 13.2 billion debit and contactless payments were made last year, a rise of 14% on the previous year, and even accounted for 71.3% of all payments at the UK’s favourite ‘cheeky’ restaurant chain, Nandos.

The convenience of card payments, made even easier by contactless payments, seems to be outstripping our instinct to want to have and hold hard cash. However, beyond this the potential extinction of cash has plenty of other more pressing implications for our future selves.

This is because the way we spend money affects how we spend our money. Put simply, when we pay with cards instead of cash we spend more. We spend more in every sense: not only by being a bit frivolous, but even when buying the essentials.

The way we spend money affects how we spend our money

The notion that we could lose our ability to make consistent valuations of products and services just by changing the way we pay is a challenge to the assumptions of standard economic theory, but it’s one that has been proved time and time again.

For example, a study found that people’s willingness-to-pay when bidding for an item doubled when that payment was with a debit card rather than cash. Similarly, mobile payments, increasingly popular through apps like Apple Pay, Android Pay and Visa’s ‘’ have been found to have a significant influence on spending habits.

The problem isn’t with the technology, but on a very human level. When we make our decisions about value and how much we should pay for items, we’re making a trade-off on the immediate pain of paying, balanced against the future benefits from consumption. We become inconsistent in making these decisions due to our brains susceptibility to contextual factors, in this case the method and speed of the payment process.

Put simply, we find paying with cash more ‘painful’. It’s been shown that relative to paying for a product or service with cash, other payment methods are less transparent, so we don’t feel the outflow of money as saliently. The vividness of the money outflow leads to a higher pain of paying with cash than with other less transparent payment modes.

The popularity of these newer payment methods aren’t likely to be reversed. And the way your brain has evolved to process information isn’t likely to change any time soon either. So for the sake of staying on top of your spending in a cashless economy here are a couple of tips:

Set reminders

When spending money over any period of time we have a tendency to underestimate how much we’ve spent. When using cash, there are more opportunities to remind ourselves: over the course of a night out you can visibly see the contents of your wallet emptying! The same can’t be said for card or mobile payments. Fortunately, if you have access to mobile banking you can set reminders that will help you track you spending. It may be a bit more ‘painful’ to look at but it will help.

Tell your friends

If you’re trying to commit to any sort of behaviour change telling your friends about it can be a good idea. This is because we’re always trying to project the best side of ourselves and by making a commitment public you’re creating the additional incentive of saving face. Not only that, but you also count on them to remind you of your commitment any time you look like slipping up.

Nudge yourself

If you’re wanting to save for something in particular, such as your first home or a new pair of shoes, you can nudge yourself to keep this target in mind with a couple of simple prompts.
For instance, if you mostly pay for things by card, then put a picture of the item you’re saving on the inside of your wallet. This will remind you of your saving goal every time you go to spend. This technique has been used by parents in India save for their children’s education.

In his joint role across the H+K Smarter and People + Purpose team, Angus works to develop behavioural science based solutions for communication challenges with global brands such as Ford and Wikipedia.

H+K Smarter is our behavioural insights and strategies team. It combines deep academic expertise with extensive practical experience to help clients create communications that reflect the ways in which people really do behave and make decisions, rather than on how we think they should behave and make decisions. Influencing people isn’t luck or magic – it is science.