The Effect of Payment Methods on Personal Finance Management

Contactless and mobile payments have become popular globally, yet their impact on personal finance is still largely unknown. Literature on credit cards shows that ease of use and reduced payment friction are associated with increased spending, reduced spending awareness and increased debt accumulation. Exploiting a large data set of financial transactions from a British aggregator app, we looked at the effect of contactless and mobile payments on a wide range of indicators, including spending, savings, and potential correlates of financial distress. Our event study design revealed significant increases in spending and savings, but no changes in overdraft fees and unsecured debt. Most of the changes are driven by increased activity on the account on which the new payment methods are activated. Contactless and mobile payments may shift transaction activity between accounts, but do not necessarily promote adverse financial consequences.