Research: digital wallets encourage young people to be more consumptive
An electronic wallet, or e-wallet, is an electronic payment facility that can be used online through a mobile application.
According to Bank Indonesia Regulations regarding the implementation of financial technology, digital wallets are included in the category of payment systems (payment gateways).
In Indonesia, the most popular e-wallet applications include Gojek (Gopay), LinkAja, OVO, and Dana.
In 2018, BI reported that e-wallet transactions had almost reached Rp. 21 trillion, and it is predicted to increase 17 times by 2023.
The use of this e-wallet allows easy cashless transactions for users, because they only need to use a smart phone that is used daily.
Moreover, the offer of cashback or cash back after payment and the discounts offered are tempting for users. These offers are given by companies to seize market share.
In addition to the convenience and attractive bonuses offered, my latest research shows that using this digital wallet can actually make young consumers more consumptive.
Analysis
Last year, Erwin Karnadi and I, a lecturer at the Faculty of Economics and Business, Atma Jaya Catholic University of Indonesia conducted a research on Financial Literacy Generation Z.
One of the preliminary studies was to conduct a small survey using an online questionnaire to obtain an overview and preference for their e-wallet usage.
We managed to get 405 respondents aged 18-21 years in the Greater Jakarta area. Data collection was carried out during July and August 2019.
The average age of our respondents was 19 years. The majority of them are students who still receive pocket money from their parents, and a third of them work part time and freelance.
From our findings, 90% of respondents use OVO, 86% use Gopay, 56% use Dana, and 5% use Linkaja.
The answers to the questionnaire indicated that more than half (58.4%) of the respondents felt that they had become more consumptive.
Only 30% felt they could manage their finances better, 27% felt the opposite.
Why can encourage consumptive behavior
The fierce competition for market share between these e-wallet companies has resulted in lots of rebate and cashback promotions. This discount war can cloud the notion of "thrifty" and lead to consumptive behavior.
Due to promotions that attract people to be tempted to spend money on goods or services that are not really needed; money that can be allocated to other things.
Keep in mind that when a product costs IDR 100,000 is cut by 60%, you are still spending IDR 40,000.
After further investigation through short interviews, 9 out of 10 respondents did use this application because of the promotional offers and the ease and convenience of using it.
Yes, financial decisions are individual rights. However, it is still important for all of us to be careful in managing our finances.
Consumptive impact
Consumptive behavior is not always bad. Increased consumption is able to grow the economy, because increasing demand certainly encourages the production process which leads to increased employment.
For example, Gopay in 2018 had 420,000 business partners, 90% of whom were small entrepreneurs. Gopay also claims that Micro, Small and Medium Enterprises (MSMEs) that joined have increased 69 times in a year and experienced an increase in turnover due to promotional assistance in its application.
But excessive consumerism can also hurt mental health, adversely affect the environment and the planet, and on a micro scale, can trap an individual into excessive debt.
Debt itself is also not always bad as long as the debt is productive, for example buying goods whose value will increase. The negative is consumer debt or buying goods whose value will shrink in the future.
Generation Z who grew up with the digital revolution will soon dominate the world's demographics. It cannot be denied that they are fluent in the use of technology, but it must also be balanced with the wisdom of its use.
The younger generation must be a smart generation so that they can prosper to old age, and do not repeat the mistakes of the previous generation.
How to prevent consumptive life
The following are some tips on how to prevent consumptive behavior.
1. Distinguish between needs and wants.
A need is something that is owned to survive while a want is something that is not needed but can improve the quality of life. For example, the mode of transportation is everyone's need, while owning a luxury car is a desire.
2. Have a financial plan
We must be wise in preparing financial plans. For example, Sir Li Ka-shing, a tycoon from Hong Kong taught to divide our income into five items: 30% for living expenses, 20% for socializing, 15% for self-development, 10% for travel, and 25% for investation.
And more importantly, we must be disciplined to live the financial plan.
3. Take care of your lifestyle
This is an extension of the point above. As time goes by and career or business increases, financial planning must also be updated.
Young people are often tempted to increase the (cost) of their lifestyle as their income increases. Especially those who are just starting out.
Instead, when income increases, we are not more consumptive even though there may be lifestyle demands.
