Why mobile banking is to blame for your overspending habits

by Enock Bett · Published February 27, 2020 · Updated February 27, 2020

Mobile technology has rapidly evolved in recent years. Through the use of smartphones, our world has been reshaped, lives and behaviors transformed, and how people do various businesses with each other, companies, and government has completely changed. One sector that has been forced or rather has had a major shift as a result of mobile technology, is the financial industry. The adoption of smartphones by many people around the world made banks to venture into the mobile banking business with a purpose of keeping up with the trends and as a way of tailoring their businesses to attract new and existing customers into adopting their mobile bank services.

In Kenya for example, almost every bank has a mobile application in which customers that have registered can buy or send airtime, check their bank balances, transfer funds from the bank to MPESA, pay bills such as DSTV, GOTV, KPLC token top-up, and carry out a number of activities directly from their mobile phones without having to visit the physical bank. A customer can access all these services by just logging into the app anywhere and anytime you want. It is possible to keep track of all the financial records and transactions without having to line up for hours at the bank’s branch to statements.

While this is the easiest and the best way to carry out financial transactions with zero hassles of carrying cash money around, I have one problem with this digital banking, and it’s the issue of overspending. Each end of the month, I set a budget plan that is supposed to guide my expenditure throughout the coming month up until I receive my next payment. Unfortunately, this plan does not go well because I always end up in the middle of the month broke and in big debt as if I had no money at all, thanks to mobile banking. Since I downloaded my banks’ applications on Playstore, I have been making mindless purchases, transferring money in the bank to my mobile in bits, justifying every move with the popular phrase, ‘The last one.’

Mobile banking may have interfered with how our psychology works, thereby eliminating the pain of having to part with the physical cash. When you pay for some services or goods with cashless means such as pay bill and till numbers, is not the same as paying for the same with cash money. Parting with hard-earned cash tends to make you feel scorpion sting. According to research, the psychological pain associated with payment and parting with money can vary not only as a function of the objective amount but also can vary based on means of payment form even when the amount is held constant.

Personal experience led Avni M. Shah, an Assistant Professor of Marketing in the Department of Management at the University of Toronto Scarborough, into studying this behavioral change. In her dissertation findings, Shah noted that people who pay for items with cash, are forced to confront the money they’re spending and this creates an emotional attachment to the purchase. “Digital payments seem less real than cash, it’s true that the unreality of these methods can cause people to make more purchases,” she said.

Without any pain in payment, we subconsciously tend to overspend on meaningless commodities. You will meet with friends at a hotel, you will pay for the food using a till number or debit card and you will not feel any pain.

Manoj Thomas, an Associate Professor of Marketing at Cornell University carried out a research, his team analyzed the spending habits of 1,000 shoppers at a large chain store over six months in 2003 and then conducted two controlled experiments at Cornell and SUNY Binghamton, as well as an online experiment. Their final conclusions were that the pain of paying in cash can curb impulsive urges to make meaningless purchases.