Why cash still has a place in our digital world

If the universal adoption of contactless payments is anything to go by, we’re moving towards a cashless society. But not quite yet.

Earlier this month, statistics showed an 8% monthly increase in personal cash withdrawals.

So cash still has some use? As the cost of living crisis concerns continue to mount, many of us are turning to cash as a reliable way to rein in spending. Why? Partly because the act of spending physical money is so memorable. Finding, counting and handing over a selection of banknotes to pay for an item sticks in mind more than a quick swipe over a card reader.

As such, consumers typically find tracking how much they’re spending easier. The same cognitive bias also dictates the likelihood of us consuming items in the first place. Like those new shoes you want but don’t necessarily need - how much easier it is to impulse purchase when it’s just numbered on a screen!

And there are studies to prove it. Research has shown that individuals who pay by card have a less accurate recall of the amount paid than those who transact with cash. The report concluded that this recall accuracy effect typically led to overspending as “a precise recollection of past spending affects the willingness to spend money in the future.”

So clearly, there’s a logic behind such behaviour. But does that mean cash is a safer all-weather spending solution? Not quite.

Prone to theft, damage and misappropriation, cash carries its own set of risks. Yet having been a part of human history for thousands of years, people can be forgiven for finding comfort in the familiar. And while financial technology has evolved rapidly in recent years, some of our old money habits remain.

We believe that the ambition to create more innovative financial solutions should be tempered with the need to make spending feel real. By combining the ease and convenience of digital payments with a more memorable transaction experience, we can help provide more effective solutions for businesses and consumers.

While cash continues to perform a necessary function alongside its digital alternatives, fintechs must remain open and understand the benefits of physical money.