Technology has had a huge impact on the financial industry; it's completely changed how we spend and manage our money, as well as how we budget.
What once used to require a trip to the bank can now be achieved almost anywhere through a few clicks on your mobile. We've gone from cheque books being an everyday essential to today's almost cashless society. While these changes have made managing our finances more efficient it has also raised some new challenges we need to be mindful of.
Seemless spending - the end of cash
One of the most direct impacts technology has had on our finances is how we spend and use money.
Cashless society
We have over time, and in line with the evolution of technology, moved into an almost cashless society. We have seen trips to the bank evolve into trips to the closest ATM, to today where most transactions can be achieved through your closest device. The need for physical cash has become somewhat irrelevant, and through the COVID-19 Pandemic, cash has been downright discouraged!
This has had a direct impact on the way we use and spend money. A simple tap of your card or device and you've purchased your morning coffee, or perhaps you even pre-ordered your coffee through an app so it was already waiting for you by the time you reached the cafe.
Prior to COVID-19, a bank conducted a survey which supported the view that cash is being used less. It did find, however, that certain segments of our population are still using it quite frequently, including older adults, those that have lower household income, live in regional areas and/or have limited internet access. Post COVID-19, however, it is expected that the cash trend will only amplify, even into those areas that have been previously resistant to the change as a global crisis can be a catalyst for structural changes. According to the RBA, since 2007, cash has decreased from being used in nearly 75% of transactions, down to approx 30% in 2019.
Our spending habits
We no longer need to leave the house to spend our hard-earned money either! Almost everything can now be purchased online, giving you the ability to quickly compare prices and have your order arrive directly to your door.
There have also been new payment options developed in the rise of buy now pay later (BNPL), challenging and reversing the traditional concept of lay-buy. BNPL options like AfterPay and ZipPay allow you to receive your item instantly and pay it over time, sometimes with interest-free periods.
The primary benefit here is time efficiency. These technology advancements have created a ripple effect and also impacted the way perceive and value money.
Impacts on how we value money
When money is in its physical forms, such as notes and coins, we tend to place a higher value on the same amount of money than we would during an electronic or card-based transaction. For example, you may find it hard to spend $100 if it was given to you in cash, as you would be aware of every dollar you spent on that transaction. In comparison, you may tap away $100 on your card without even realizing.
In younger generations, BNPL also adds to the temptation of impulse purchasing knowing you can purchase an item now for $80 however only having an item now for $80 however only having to pay $20 upfront. Ultimately it can give a false impression the value of the item and you may end up buying items you usually wouldn't or overspending on your budget.
There are also different behavioral instincts around money which can become harder to manage in a cashless society depending on your money type. For example, if you are a "spender" or a "gambler" you may want to consider using physical cash to remind you of how much you are actually spending.
For children of generation Z, money may be something they have had minimal exposure to compared to other generations. Perhaps their pocket money goes straight into a savings account or they are practiced at tapping your card from a young age. Only time will tell what impacts that will have on their relationship with money, but research to dates indicates it will be more of a challenge to grasp the true value of a dollar earned and spent.
Impacts on how we manage money
Technology has also had an impact on how we manage our money, including how we view and track our money and also how we budget.
Visibility
A massive benefit of all these digital transactions is traceability! If you want to know where your money is going, you can relatively easily find out. Log on to your bank portal and you have the ability to see all your accounts, balances, and investment performances in real-time right in front of you. Even super balances and student debt fees are now visible using platforms such as myGOV.
Efficiency
We have seen the ATO move to more efficient reporting processes through technology -- gone are our annual payment summaries for example. Now, your employer can lodge this for you and the information is submitted on your behalf. Online processes such as loan applications can also now all be finalized online in a matter of minutes.
Budgeting
With all this transparency comes knowledge. Budgeting has become digitalized, no more hours of number crunching and statement hunting, with an abundance of budgeting tools and resources at your fingertips.
There are also apps which can provide you with a complete overview of your spending.
Where to take caution
While many positives come with the digital age it's also important to be conscious of your cyber and security risk, this includes never opening links in emails that seem suspicious, never providing your details online or over the phone with an untrusted source and ensuring you cancel any misplaced cards as soon as possible. A practical tip to protect yourself is to call the institution directly yourself. So if you get a phone call or email, make your own call to that provider and ask if the query is legitimate. If it is, then you can resolve it at that point without the risk of providing personal information to a fraudulent source.
What should you do about it?
As the financial world continues to transform, there are so many opportunities for you to benefit. Check with your financial providers to see what they can offer you. You may be delighted to discover ways to save time and money along the way.
Find your advantage
We are finding the ability to track and manage spending through technology is exciting for our members. While we may be spending more digitally which as we discussed can lead to increased unintended spending, the counter to that is using tech to stay on top of things.
Keeping pace
Our world and industry are constantly adapting, and we too must grow and adapt alongside. It comes down to finding a way to make technology work for you. There are numerous ways the advancement of technology has enabled us to provide a higher level of service to our members, in the way we communicate, provide information and plan for you to live your best possible life.
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