Expert Tips for Responsible Spending in the Age of Mobile Payments

It is becoming increasingly common for people to use mobile payment services such as Apple Pay, Google Pay and Alipay to make purchases. However, new research led by Yuqian Zu, an assistant professor at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill, suggests that these services may be influencing consumers to spend more money compared to using physical credit cards or cash.

The study, which analyzed payment activities from a leading bank in Asia before and after the launch of Alipay, found that the introduction of the mobile payment platform led to a significant increase in consumer spending. On average, customers charged 9.4% more to their credit cards both online and in person after adopting mobile payments. Additionally, they made more purchases, indicating a higher level of transactional activity.

Convenience and Speed

One of the main contributing factors to the increased spending with mobile payments is the convenience and speed of the transactions. According to the study, mobile transactions took an average of 29 seconds, compared to 40 seconds when using physical credit or debit cards. This swift transaction speed significantly enhances the overall convenience experienced by users. Furthermore, the elimination of the need for physical cards means that consumers don't need to carry wallets or purses, which many people perceive as a security enhancement for commercial activities.

Potential Impact on Debt

Yuqian Zu expressed concerns about the potential impact of mobile payments on consumer debt. She believes that the ease of mobile payments may lead to consumers racking up more debt due to increased spending. While it's not suggested to completely avoid mobile payments, she emphasizes the importance of being aware of the potential behavioral changes that these services may facilitate, including a tendency to spend with less restraint.

Zu highlights the risk of impulsive spending at checkout registers and online, where consumers can securely store their credit card information. Due to the convenience of mobile payments, consumers may make purchases without fully realizing the extent of their spending. Therefore, being mindful of these tendencies can help consumers better manage their financial resources and reduce impulsive expenditures, resulting in more responsible spending habits.

While the convenience of mobile payments is undeniable, it's crucial for consumers to be aware of the potential downsides, including increased spending and the risk of impulsive purchases. By staying informed about the behavioral effects of mobile payment services, consumers can make more conscious decisions about their spending habits and work towards achieving greater financial stability.