The Digital Payment Trap

The digital payment is bringing revolution in India. Making instant payment has never been so easy ever. But no one is talking about the silent increase in the spending.

Hi there,

I hope you are doing well. The third wave is all around us, and we are more exposed to the situation than we think. As you all know, I tested positive for COVID this week, and I have been taking rest ever since to recover.

While I was paying for my RT-PCR test charges the other day, I was surprised to see how convenient it was to pay. I knew that the test (or any other product or services) did not come for free, but the feeling of money going away from the account was not there. I consider myself frugal for my spending habits, and this incident really kept bothering me.

So I started digging in a little. I fetched my bank statement from the last two years and observed the spending trend. I was amazed to see the eye-opening insights. My spending on food, entertainment and useless products increased by over 40%. The monthly leisure budget also did shoot up (Despite the pandemic :D ). I really wonder how this happen.?

The shift of the saving pool

After some thinking, I discovered that I was spending from my small reserve ( physical wallet) earlier. So it has a limited fund which gave me a sense of spending/losing money. This sense completely vanished when I directly shifted to the central reserve (Bank account). The difference between the money spent and the money left in reserve became exponential.

For example, I was paying 650 bucks on a movie from 2000 notes in my wallet, losing 1/3 of my fund. Now I spend the same 650 bucks from 60K in my bank account directly, losing roughly 1/100th of my fund. Have you ever noticed how our moms keep a small container for oil in the kitchen? Now imagine, she starts using oil directly from the 15L jar! Well, that's what we have started doing.

Shifting back to the classic cash?

I still remember withdrawing cash from my weekly spending from the ATM. This helped me in keeping track of my spending. Now it's gone! So what can we do about it?

One way to gain some track is to spend from the digital wallet instead of the account directly. We can refill our digital wallet every week as per the budget. It is difficult to completely move back to cash, but keeping digital wallets still seems feasible. There is a quote I truly believe in

"More money can't fix bad spending habits."

Do take a look at your spending trends when you are free. It will make you an efficient spender :)

Do let me know your observations as well :)