Do Mobile Payments Users Make Worse Financial Decisions?

November 13, 2018         By: Steven Anderson

Mobile payments have made their mark on markets from the young to the old, and for the millennials in particular, they’ve proven a crucial part of life. Yet a new study reveals that those mobile payments-using millennials are often less financially literate than others. It begs the question: is it the mobile payments systems that cause financial illiteracy, or is it that mobile payments users are less financially literate for completely unrelated reasons?

The study, released by George Washington School of Business’ Global Financial Literacy Excellence Center, found that mobile payments-using millennials had less financial literacy than other millennials who didn’t use mobile payments tools. Additionally, these millennials were also more likely to engage in other risky financial behaviors like using payday lenders frequently or overusing credit cards.

However, the study also found that mobile payments users often had more assets, saw higher wages, and were better educated. One in four people who tracked their spending with mobile phones actually overdrew their accounts, as compared to one in five who didn’t track spending. Amazingly, people who actively tracked their spending were more likely to overdraw their accounts than those who didn’t.

Trying to account for this is difficult, but some posit that mobile payments make spending just too easy, and remove the connection—and sometimes pain—of spending. It’s an actual feeling to hand over cash and see it return smaller after a purchase. With mobile payments, it’s just digits on a screen, and there’s less actual impact involved.

That’s entirely possible, but it also points out the one major problem with a study like this. There’s no way to tell if the mobile payments are the issue here or if the study managed to assemble a collection of people who aren’t financially literate. Basically, discounting coincidence here is completely impossible, and there are more explanations besides. The higher wage-earners may feel more confident and thus more prone to overspending. They may also be more apathetic about their finances since they’re “making good money.”

There are too many possibilities here to pin one down, but the connection is present. Mobile payments might have at least some link to a lack of financial literacy, and that could be a hurting thing in the end.