28 September,2024 08:57 AM IST | Mumbai | Mitali Parekh
Pic/iStock
I feel a sense of power when I say, âI don't need this'," says Lisha Mansukhani, 50, over the phone. "This" could be any consumer item, even a bag of her one-time addiction: Truffle-seasoned potato chips. "I was addicted to them and there they were on sale, so I thought why not buy a bunch of themâ¦and then stopped myself."
The content writer, who lives in Dubai and Worli, Mumbai, has shunned credit cards and UPI apps for almost a decade. Instead, she relies on cash and one online wallet linked to an e-commerce platform. She loads that wallet with money from her bank account for monthly groceries, but has lately realised that she can't use the balance for the monthly subscription option - the reason she started the wallet in the first place.
"Recently someone needed to send me money electronically, and I told them to put it in my wallet," she says, "Now I find myself spending twice the amount because I can't use the e-wallet money for all purchases. Sometimes, I spend from it impulsively because âpada hai na paisaâ¦'"
Recent researches - by Forbes Advisor and Business Standard independently from each other - found that people tend to spend more when making cashless transactions either by tapping a card (debit or credit), using pre-saved card details online, or through UPI and e-wallets, hoisted by the absence of the âpsychological pinch' of parting with cash.
The Business Standard survey, conducted among 2,300 Indians, found that 84.4 per cent respondents admitted to spending more with digital payment modes. In the Forbes study, which had a sample size of 2,000 US residents, 58 per cent of the participants said card payments are most likely to make them spend more.
This aligns with the findings of a study conducted recently by the University of Melbourne and University of Adelaide in Australia published in the Journal of Retailing: That consumers spend more using cashless payment methods compared to cash, particularly when it comes to luxury items. And this also coincides with the large consumer debt we are shouldering collectively.
In 2024, India's household debt reached around $671 billion, which includes consumer durables and personal loans - a record high of 39 per cent of the country's GDP (as per an analysis by Motilal Oswal). The report said that this is mainly driven by faster growth in non-housing debt.
Ironically, this impulsive cashless spending does not extend to charity or tips. Lachlan Schomburgk, a PhD student at the University of Adelaide, who led the Australian study that looked closely at the spending habits of 17 countries, found that "Against our expectations, we found that cashless payments do not necessarily lead to greater tips or donations in comparison to cash."
Mansukhani has been credit-card less since 2015, when she was forced to live without one as her card couldn't be delivered while she oscillated between residences in two countries. Once she got it, she tried to use the lounge access promised at an airport. "And it was so embarrassing trying again and again to get the OTP, while others passed me by," she said. "All the benefits they offer are smoke anyway." After repeated conversations, Mansukhani requested for the card to be cancelled and cut it up, only to receive a call a few months later informing her of XYZ added benefits, at which point she realised they had not cancelled the card at all.
She has also seen her friends juggle 20-odd credit cards, transferring the debt from one to the other for points and other benefits, and decided to do without.
Added to the lack of the "psychological pinch" that curbs spending with cash, is the ability of our mind to function in silos: "We have various apps on different devices," says Mansukhani, "and when we close one, say the phone after a Swiggy/Zomato order, we open the tablet and start again with Amazon or Flipkart, and then get on the laptop and respond to an online offer on T-shirtsâ¦"
Each is a minor dopamine hit, fuelled by a surge in stress from news on social media or an urge to buy this and that in the name of self-care. "I think this self-care [wave] or [thinking] âI deserve this' has also reached unrealistic levels, making us buy small things that add up to a lot."
So Mansukhani's âI don't need this' mantra becomes stronger. "If it's a big item, say, a laptop," she adds, "and I can't split it across two debit cards, I obviously can't afford it." She uses bank transfers and cash where she can, as does Roma Chawla, 37.
"I've never used a UPI app," says Chawla, a Bandra resident, "because I believe it's risky to have all your personal information stored on your phone. I also don't feel comfortable sharing my phone number with anyone, so that makes me even more cautious. I know there is a scanner [for UPI payments], but many times I have seen it doesn't work." Because of this, the fashion designer and stylist makes no impulsive purchases and has no consumer's guilt. In case of an emergency that needs an electronic transfer, she calls her sister who does the needful.
Does this habit exclude one from the cashless economy? The aim, says former banker Satish Mehta, founder, Athena Credxpert LLP, is to be cash-less (as in use cash, less) rather than absence of cash transactions.
"A credit card is the most expensive piece of plastic," says the former managing director of CIBIL, "you pay 40 per cent interest if you default on paying it in full. It started out as a convenience for those without adequate cash income for larger purposes."
UPI is an extension of this contactless transaction "convenience" to a debit card and it presupposes you have the cash inlets for the expenditure outlet. The use of credit cards and bank loans for large expenses such as cars, houses or education builds a credit score which is a quantifiable evaluation of how dependable you are when being lent money - your credit worth, in numbers.
"The credit score of a person ranges between 300 and 900 points," says Mehta, "and is based on a complex algorithm of secured and unsecured loans, open and closed loans, past defaulting history, if any, inquiries about missed payment and whether you have been shopping around [and been refused] loans. Using your credit card judiciously helps build your credit score and credit history, which in turn stands you well in future when you need a loan. Using your credit card judiciously helps build your credit score and credit history, which in turn stands you well in future when you need a loan." Down to the dictum âpast behaviour is the best indicator of future behaviour', your credit score decides how reliable you are for large loans.
So if you've never needed to go to a bank for help with medical bills, education or to buy a house, it does underscore the privilege of having a few lakhs and crores in cash to do so.
Or, you could be extremely judicious like photographer Ritesh Uttamchandani, 42, who is "like most good companies not listed on the stock market - not in debt and never has been".
His prudence stems from a combination of past experiences, such as when cops came knocking on his hostel room door because a roommate had been making extravagant and shady transactions using his parents' credit cards. Then, as an intern, he was tasked with making excuses - on behalf of a defaulting senior - to creditors who called on the office landline. "I hated it," says the Goregaon resident.
As an independent professional, he likes to know, and literally feel, the scale of his expenditure. "I could swipe a card for a R900 pizza," he says, "or handle two R500 notes. Knowing the scale of my spending helps me control it."
He also dislikes the "leaking of small amounts" as service, convenience or bank charges that come with every transaction online, and the harvesting of data even if you buy a pack of chips. "I recently tried to pay with a R100-note for a packet of kurmura that cost R25," he says. "They said they didn't have change - across 10 counters - and requested I do a UPI transaction instead, so that they get my number."
Uttamchandani does use the BHIM UPI app, which comes with a cap on daily expenditure. Payment frauds on UPI jumped from 1.95 lakh cases in 2021 to 7.25 lakh in 2023, with losses increasing from R1.1 billion to R5.75 billion, the Business Standard study found.
Besides all this cautious behaviour, is the understanding of how easily cash moves in an economy that relies on daily income. "When I pay the corner vada-pav guy in cash," says Uttamchandani, "he tells me he can clear the debt with the pav-wallah immediately. It's the same among friends. We have to split bills and someone is not carrying cash, and now a friend becomes a debtor and there is follow-up, and all that. Why? Just have R500 in your pocket when you step outâ¦"
$671 BN
India's household debt in 2024, as per Motilal Oswal
84%
Of Indians say they spend more with digital payment modes
'Source: Business Standard survey
