This is how technology is making it easier to go broke
Without question, technology makes your life easier. But, it’s also making you more broke.
With the wave of your phone, the tap of your card, the push of an Amazon Dash button, it’s never been easier to part with your hard-earned bucks.
In 2015, only 25 percent of Canadian transactions were in cash, according to an online survey by market and consumer information firm GfK. Moneris, which processes one out of three Canadian payment transactions, has seen contactless spending—tapping cards or phones—swell by 145 percent in the third quarter of this year over the same period in 2015. In 2014, contactless spending accounted for one in 10 of all of Moneris’ transactions. Last year, it was one in five. Now, it’s a third.
“You’re the exception now if you’re not tapping because it’s so fast and it just makes sense,” says Rob Cameron, Moneris’ chief product officer. “There are limits of $100 [on transactions]; but with the thumb print and pin number on your phone, you’ll soon be able to tap with everything you buy.”
While there’s nothing inherently wrong with this technology, experts are warning of the habits that can develop from the ability to part with cash so quickly and mindlessly.
“Your perception of how hard you’ve worked to earn the money, how difficult the transaction is to go through with, and how often you write down and remember the amounts that you spent, all of those things vanish when you tap or swipe a card,” says Dilip Soman, a professor of marketing at the University of Toronto, who studies behavioral economics.
Soman did a study in a Hong Kong cafeteria and found that those paying with contactless cards versus cash splurged more on drinks and desserts. When money is abstract, it’s easy to lose track of it and, more importantly, it doesn’t hurt to spend it. Seeing a price tag and handing over cash stimulates part of the brain known as the insula, which is associated with pain. And it should sting a little when you’ve worked an hour to earn $25 and it takes only a second to press the one-click buy button.
“Pain keeps us on track,” Soman says. “When you take the pain away…we lose sight of where we stand financially in our monthly spending cycle and where our priorities are. In some sense, taking that pain away is dangerous.”
With convenience comes more consumption, scientists say. Research shows that when things are on auto-fill, we actually consume it faster and more of it. We’re also less likely to shop around or compare prices. This is something to keep in mind when Amazon makes its new buying features available in Canada because soon you’ll be able to reorder laundry detergent by pushing the Dash button on your washer or telling Alexa, the Amazon Echo device’s intelligent voice assistant.
If that’s not impressive enough, the banking and retail industry is working on making online payments even easier. For example, MasterCard recently announced that North American customers will be able to verify their online purchases by swiping a fingerprint or snapping a selfie instead of the time-consuming checkout process of leaving your shopping cart to enter a password.
“The promise of technology is limitless,” Soman says. “But while it makes things easier and reduces the pain [of spending], there are a lot of apps that help you budget better or give you feedback on your own spending.”
While it might seem redundant to use one type of convenient technology to temper the use of another convenient technology, that’s pretty much where we’re at. There are financial apps to help track expenses, create budgets, and send alerts if users spend too much in a certain category. Most bank apps have helpful reminders for bills and low balances—some even display a bank balance with a tap of a smartphone or smartwatch without having to log in. Finally, for those who don’t trust themselves with all this easy-to-spend money, they can set up an automatic savings account that withdraws cash before they have a chance to tap it away.
Tap technology might be the type of progress that comes with a (literal) price, but it doesn’t have to be an automatic drain on account balances.