The Frictionless Dirham: An Empirical Analysis of Cashless Payment Systems and Consumer Spending Habits in Dubai

Abstract

There has been a rapid proliferation of cashless payment systems in the UAE, with policy-level emphasis on a digital-first economy under the UAE Vision 2031. This rise in cashless payments has a serious impact on consumer transaction dynamics. With its robust digital infrastructure, the UAE has one of the most cashless societies with significant penetration of contactless payment systems. This paper investigates how various cashless payment models, particularly mobile wallets, contactless cards, and peer to peer application, impact the consumer at psychological and behavioural levels, with specific focus on the youth and young adults of Dubai. Using an explanatory, sequential, mixed-method approach, this research collected primary data from 150 respondents across Dubai. While the structured survey questionnaire collected quantitative data, selected 12 participants from the same sample were also interviewed to gather qualitative data. The quantitative findings reveal a statistically significant positive correlation between the frequency of cashless transactions and the likelihood of impulse buying, showing that consumers using cashless methods are spending 47% higher than their cash using peers. Qualitative data supports the view that reduced ‘pain of paying’ traditionally associated with paying in physical cash is a very likely explanation of this increased spending and circumvents conscious budgeting. This paper contributes to behavioural economics literature by contextualizing global theories of mental accounting and payment transparency within the UAE’s highly digitized, high-consumption economic environment, with special focus on Dubai.