By 
Think about the last time you paid cash for something. You counted out the bills. You felt the weight of coins. You watched the amount leave your hand. Compare that to the last time you tapped your phone at a checkout. A fraction of a second. No friction. No awareness of what just left your account.
That gap in experience is not just a feeling. It is a documented psychological and behavioral phenomenon that is changing how much people spend, how impulsively they invest, and how quickly they take on debt, often without noticing any of it is happening.
A 2023 study published in the Proceedings of the 56th Hawaii International Conference on System Sciences examined how personal finance management apps and digital payment tools affect the financial behavior of young adults. Researchers from the University of Vaasa and the University of Jyvaskyla collected and analyzed stories from 191 university students about their experiences using financial apps (Herrala, Vartiainen, and Koskelainen, 2023). The findings describe a double-edged reality: the same apps that help people budget and save also make it structurally easier to overspend, borrow impulsively, and lose the felt sense of what money actually is.
“As all purchases and payments were made from a small screen, he found himself thinking less and less about how much money he was actually spending.”
Study participant, quoted in Herrala, Vartiainen and Koskelainen (2023)
The Research: What Happens When Finance Lives on Your Phone
The study used a qualitative method called empathy-based stories, where participants write short narratives from a hypothetical perspective about using financial apps. Across eight different story variations covering saving, budgeting, consumption, and borrowing, 191 respondents described both the genuine benefits and the genuine harms of digital financial tools.
The researchers framed their analysis through the lens of emancipation theory: whether technology sets people free (emancipates them) or constrains them (oppresses them). Their findings confirmed both dynamics simultaneously. The same digital tools that give people unprecedented access to their finances, that let them transfer money instantly, track spending in real time, and invest from anywhere, also create new behavioral vulnerabilities that physical money and traditional banking did not.
The most practically significant oppression findings for everyday spenders fall into five categories.
Five Ways Digital Money Is Working Against You
1. You Lose the Felt Sense of What Money Is Worth
This was the most consistent finding across the research. When every transaction happens on a screen through a tap or a swipe, the psychological connection between a purchase and its real cost weakens. Study participants described noticing their sense of money’s value becoming “blurred” when all spending happened digitally. One participant described realizing they were thinking less and less about how much they were actually spending, precisely because the format of the transaction provided no natural reminder (Herrala et al., 2023).
This is not a personality flaw or a lack of discipline. It is a structural consequence of how digital payment systems are designed. Physical cash creates what behavioral economists call the “pain of payment”: the psychological friction of handing something tangible away. That friction acts as a natural brake on spending. Tap-to-pay removes the brake.
Research on pain of payment consistently shows that the more abstract the payment method, the less the transaction registers as a loss. Credit cards spend more easily than debit cards, which spend more easily than cash. Contactless payments on a phone spend most easily of all, because the barrier between intention and execution has been reduced to a single gesture.
2. Impulsive Buying Becomes Structurally Easier
One of the more vivid examples in the research described a participant who deliberately left their wallet at home on a shopping trip specifically to avoid spending money. Their phone came along for music. By the time they had wandered into a store, they were at the checkout paying with their phone before they had consciously decided to buy anything (Herrala et al., 2023).
This pattern illustrates something important: digital payment tools remove the natural pause points that physical methods create. Finding your wallet, counting cash, inserting a chip card and entering a PIN, each of these steps creates a small moment of conscious decision. Tap-to-pay with a phone collapses that sequence to zero. The research found that this excessive ease of transactions was one of the most commonly mentioned negative consequences of digital financial tools, specifically because it bypassed users’ own intentions about their spending.
The study participants described making quick consumption decisions that did not support their financial goals, and doing so in ways that felt more automatic than chosen (Herrala et al., 2023). The apps that were supposed to help them manage money were making the money easier to lose.
3. Impulsive Investment Decisions Replace Long-Term Thinking
The research found a parallel phenomenon in investing. Several participants described how the effortlessness of buying and selling stocks on a mobile app made it structurally difficult to maintain a long-term perspective. When the phone is always available and the execution of a trade requires only a few taps, the natural human tendency toward impatience and reaction gets amplified rather than checked.
One participant described the situation directly: buying and selling shares on a mobile phone is so effortless that when the phone is always present and ready, it becomes difficult to take a long-term investment approach (Herrala et al., 2023).
This connects to a well-documented problem in investment research: the more frequently investors check and act on their portfolios, the worse their outcomes tend to be. Trading costs accumulate, emotional reactions to short-term movements drive poor timing decisions, and the compounding effect of staying invested gets interrupted. The research found that compulsive portfolio monitoring was itself identified as a stressor, with some participants describing what amounted to an addiction to checking their investment apps in real time.
Our guide to building a 3-fund portfolio covers the evidence for why less frequent engagement with your investments typically produces better returns than constant monitoring and trading.
4. Borrowing Becomes Dangerously Effortless
The research identified the ease of consumer loans through mobile apps as one of the clearest examples of oppression in the digital finance ecosystem. Participants described being able to apply for and receive a consumer loan in under five minutes, a development that some explicitly connected to problems with debt, default, and damaged credit histories particularly among young people (Herrala et al., 2023).
The traditional friction involved in borrowing money, going to a bank, speaking to a loan officer, waiting for approval, signing physical documents, served a functional psychological purpose: it gave people time to reconsider whether they actually needed the money and whether they could realistically repay it. Reducing that process to a mobile app interaction removes the deliberation that borrowing decisions require.
If you are carrying credit card or personal loan debt right now, understanding how that interest compounds daily is one of the most effective ways to restore the felt cost of that borrowing. The numbers make the abstraction concrete again.
5. Algorithmic Advertising Exploits the Same Ease
The research also found that the same digital environment that facilitates payment also facilitates targeted advertising that uses your own financial behavior to push further spending. Participants described how social media algorithms learned their patterns and served increasingly personalized ads for products they were likely to buy, creating a loop where digital spending generates data that enables more precisely targeted prompting for more digital spending (Herrala et al., 2023).
One participant described the algorithm of their social media apps as having “excellently tailored” the ads to their behavior, which increased the temptation toward impulsive purchases they would not otherwise have made. This is not accidental: the business model of most consumer-facing apps depends on driving engagement and transactions, and the overlap between financial apps, payment platforms, and advertising ecosystems creates structural incentives to keep users spending.
Self-Assessment
Is Digital Money Making You Spend More?
Check the experiences that apply to you. Based on the behavioral patterns identified in 191 young adults by Herrala, Vartiainen and Koskelainen (2023).
The Psychology Behind Why This Happens
The behavioral patterns documented in the research are not random. They share a common underlying mechanism: the reduction of psychological friction between intention and action.
Behavioral science has long recognized that the “pain of payment” (the psychological discomfort associated with spending money) serves an important regulatory function. It slows down spending decisions and keeps purchases connected to the real opportunity cost they represent. When you hand over a $50 bill, you feel the loss. When you tap your phone, you feel almost nothing.
Digital payment technology was not designed to exploit this. The goal was genuine convenience. But the consequence is real: research across behavioral economics consistently shows that reducing payment friction increases spending. Credit cards outspend cash. Contactless payments outspend chip cards. And the gap between intention and execution in an investment app is now measured in seconds rather than the hours or days that would once have separated an impulse from an action.
The Herrala et al. (2023) research makes clear that this is not purely a self-control problem. The structure of the technology itself shapes the behavior, regardless of the individual user’s intentions or financial literacy. Users who were explicitly aware of their own spending patterns still described being caught by the same mechanisms. Awareness does not automatically translate to behavior change when the environment is designed to minimize deliberation.
The Specific Problem With Investment Apps
The research deserves particular attention on the investment side, because the stakes are higher and the dynamics less obvious.
A study participant described the experience of being able to react to market changes immediately, from anywhere, on a mobile device, framing it as an advantage. But the broader picture that emerges from the research is that this constant availability is also a liability. When checking and acting on your portfolio is as frictionless as checking your messages, the temptation to react to short-term movements becomes much harder to resist.
Decades of investment research support a clear conclusion: the investors who do best are typically those who trade least. The gap between a well-structured buy-and-hold portfolio and an actively traded one is driven largely by transaction costs, tax drag, and poor timing decisions made during market volatility. Investment apps that make trading effortless are, structurally, optimized to work against the behavior that produces the best outcomes.
For most people, the right approach to investment apps is to use them for setup and annual review, not for daily monitoring. Our guide to low-cost index fund investing covers why the less-active approach consistently outperforms active trading over long horizons.
What the Research Recommends
The Herrala et al. (2023) paper argues that the solution is not abandoning digital financial tools. They genuinely help with budgeting, saving, and financial awareness. The goal is designing and using these tools in ways that preserve what the researchers call “rationality”: the freedom to think through financial decisions rather than having them bypassed by frictionless design.
The research’s implications point toward deliberate friction restoration: adding back the pauses and decision points that digital design has removed. Here is what that looks like in practice.
For Everyday Spending
Use cash for a category where you consistently overspend. This is not a permanent lifestyle change; it is a calibration exercise. One week of paying cash for groceries, dining out, or entertainment reconnects the transaction to its felt cost in a way that no amount of budgeting advice accomplishes verbally.
If cash feels impractical, enable transaction notifications on your banking app set to trigger for every purchase above a small threshold (say $10). Each notification serves as a brief moment of conscious recognition that spending occurred, partially restoring the awareness that frictionless payment removes.
For Budgeting Apps
The research found that budgeting apps genuinely help with financial awareness when used well, but that the same ease of access creates compulsive checking behaviors and anxiety for some users. The strategy is using apps as review tools rather than real-time monitors. A weekly 15-minute review of your previous week’s spending is more actionable and less anxiety-producing than constant balance monitoring throughout the day.
Our guide on why budgeting apps fail covers the psychology behind app engagement in detail, and our automatic savings guide covers how to set up systems that do not require constant attention to work.
For Investment Apps
The most evidence-based recommendation for investment app behavior is to check your portfolio once a month at most, and to separate the act of research (which can happen anytime) from the act of execution (which should happen only after deliberate consideration). Deleting the trading app from your phone and accessing investments through a browser on a computer adds just enough friction to interrupt impulse trading without preventing legitimate portfolio management.
Set up automatic contributions to your investment accounts so that the default is systematic, not reactive. The 401(k) optimization guide and investing in your 20s guide both cover how to build a contribution system that runs without requiring constant engagement.
For Borrowing
Apply a 48-hour rule to any borrowing decision. If a consumer loan application takes five minutes and you feel like you need the money now, the 48-hour wait will either confirm that you genuinely need it or reveal that the urgency was manufactured by ease of access. Most impulsive borrowing decisions look different after two days.
If you are already carrying high-interest debt, the priority is understanding the daily compounding cost of that debt and working through a structured repayment plan. Our guide to paying off credit card debt covers the debt avalanche and debt snowball methods with real dollar examples.
Frequently Asked Questions
Does digital payment actually make you spend more?
Research consistently supports this. Behavioral studies show that the pain of payment, the psychological friction associated with spending, is reduced when transactions are abstract rather than physical. Research on 191 young adults found that users commonly reported losing their sense of the real value of money when handling it exclusively through digital interfaces (Herrala, Vartiainen and Koskelainen, 2023). Credit cards spend more than cash, and contactless mobile payments spend more easily than either, because each step reduces the perceived cost of the transaction.
Is it bad to check your investments every day?
For most people, yes. Daily portfolio checking creates emotional exposure to short-term volatility that tends to drive reactive decisions, which is the primary driver of underperformance in self-directed investors. Research consistently shows that investors who trade less frequently outperform active traders over long periods, primarily by avoiding the cost and timing mistakes that frequent trading generates. The research by Herrala et al. (2023) found that real-time investment monitoring was associated with stress and compulsive app checking behavior, not with better financial outcomes.
Why do I spend more when I use my phone to pay?
The short answer is friction reduction. Paying with your phone removes most of the psychological steps that create awareness of spending: physically accessing a wallet, handling cash or a card, observing the amount, and experiencing the social moment of a transaction. Each of those steps is a tiny moment of conscious processing. Tap-to-pay collapses them into a gesture that takes less than a second. Without those moments, spending happens faster and with less conscious registration of the cost.
How can I make digital spending feel more real?
Several practical approaches work: enabling transaction notifications for every purchase above a small amount, using cash for one spending category per month as a calibration exercise, reviewing every transaction manually at the end of each week, and deleting saved payment details from apps that make one-tap purchasing too easy. The goal is restoring deliberate decision points that frictionless design removes, not eliminating the convenience of digital payments entirely.
Are budgeting apps actually helpful or do they make spending worse?
Both, depending on how they are used. The Herrala et al. (2023) research found that budgeting apps genuinely help users with financial awareness and planning, which corresponds to what the researchers call emancipation. But the same research found that ease of access to payment and borrowing through apps creates oppression through impulsive decisions and a blurred sense of money’s value. The best approach is using budgeting apps as weekly review tools rather than real-time monitors, and deliberately separating the tracking function from the payment function.
The Bottom Line
Digital money is a genuinely better technology for most purposes. It is more convenient, more trackable, and more accessible than cash. But it comes with a behavioral cost that the research is increasingly documenting: the reduction of felt friction in financial transactions is changing how people spend, invest, and borrow in ways that often work against their own financial interests.
The study by Herrala, Vartiainen and Koskelainen (2023) documented five specific patterns across 191 young adults: a reduced sense of money’s real value, impulsive purchases enabled by frictionless payment, impulsive investment decisions enabled by instant market access, dangerous ease of consumer borrowing, and algorithmic advertising that exploits the same digital environment. None of these are failures of character. They are predictable responses to a technology environment designed to minimize deliberation.
The practical response is deliberate friction restoration: adding back the pauses and awareness that frictionless design removes. Use cash for calibration. Enable transaction notifications. Review spending weekly rather than monitoring in real time. Apply a 48-hour rule to borrowing and large purchases. Check investments monthly, not daily. Automate contributions so the default is systematic rather than reactive.
The goal is not to make your financial life harder. It is to make your financial decisions feel like decisions again, rather than gestures that happen before you have had a chance to think.
Academic Reference
Herrala, J.-M., Vartiainen, T. and Koskelainen, T. (2023). How personal finance management systems emancipate and oppress young people. In Bui, T. X. (ed.) Proceedings of the 56th Hawaii International Conference on System Sciences, 5542-5550. University of Hawaii at Manoa. https://hdl.handle.net/10125/103309
The study used the method of empathy-based stories (MEBS) with 191 university students. Analysis was conducted through the lens of emancipation theory (Young, Zhu and Venkatesh, 2021), examining four components: agency (freedom to act), dialogue (freedom to express), inclusion (freedom to belong), and rationality (freedom to think). Licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International.
