One of the wonders of the modern life is all of the whizzy technology available to help us manage our money. But does it mean we make better financial decisions? Maybe not.

A study of mobile-payment using millennials (ages 18-34) in the US found they were less likely to be financially literate than others of the same age who didn’t pay for things with their phones. They were also more likely to make other bad financial decisions, like overdrawing checking accounts, racking up credit card fees, borrowing from payday lenders, or dipping into their retirement accounts early, according to research by the Global Financial Literacy Excellence Center at the George Washington School of Business.

Paradoxically, this is the case even though mobile-payment users tend to have more assets, make more money, and be better educated. Research also found (pdf) that one-quarter of people who use their phones to track spending reported overdrawing their accounts, compared with 20% of those who didn’t use their phones for this.

What gives? One possibility is that electronic payments make spending too easy and budgeting more difficult. It lacks the tactile, heart-sinking experience (for some) of seeing a $50 bill return as smaller notes after a purchase. ”In the data we do not have information about what explains that behavior, but making payments easy and mindless may induce people to spend more,” Annamaria Lusardi, a professor at George Washington School of Business, said in an email.

Mobile payments at the point of sale—think Google Pay or Apple Pay—tallied $70 billion in the US last year and are forecast to increase to around $370 billion in 2022, with the number of users increasing from 50 million to 90 million during that span. (China, meanwhile, has more than 500 million mobile wallet users.) Around nine out of 10 American millennials have smartphones and half of them use the devices for payments, according to a 2016 survey.

Behavior Mobile-pay users Non-users
Occasionally overdraws checking account 21% 18%
Charged an over-the-limit credit card fee 17% 8%
Withdrew from retirement account 37% 9%
Took out a payday loan 22% 9%
Took out an auto title loan 16% 5%
Source: George Washington University School of Business


The good news for tech entrepreneurs is that technology can present solutions to the problems that tech itself creates. Imagine if your phone vibrated more violently when you made bigger purchases. Perhaps the home screen could flash a warning when you buy a pair of jeans identical to all the other jeans you’ve added to your closet recently. (That could be annoying enough to drive people back to cash.)

In the end, though, technology isn’t a substitute for basic financial education. The research suggests that people with a basic level of financial literacy made better decisions, whether or not they used fintech apps on their phones.

Read more at Quartz