A Growing Lifestyle Trend Among Gen Z
Indonesia is currently experiencing a demographic bonus, with a large proportion of its population in the productive age group. Within this segment, Generation Z stands out as a dominant force shaping consumption trends. In urban areas like Surabaya, coffee shops have become central to social life, serving as spaces for work, study, and leisure.
This environment has fueled what is known as the “latte factor”—a term popularized by David Bach to describe small, frequent expenses that accumulate over time. These seemingly minor purchases, such as daily coffee, digital subscriptions, or lifestyle products, often go unnoticed but can significantly impact long-term financial stability.
The rise of digital payments, combined with social pressures like fear of missing out (FOMO) and a “You Only Live Once” (YOLO) mindset, has made Gen Z more vulnerable to impulsive spending.
How the Study Was Conducted
The research used a quantitative approach involving 100 Generation Z respondents in Surabaya who frequently visit coffee shops and use cashless payment methods. Data were collected through an online questionnaire using a Likert scale and analyzed with SPSS statistical software.
The study focused on three key factors:
- Cashless society (use of digital payments)
- Mental accounting (how individuals categorize and manage money)
- Financial literacy (knowledge and understanding of financial decisions)
These variables were analyzed to understand their influence on latte factor behavior—habitual small-scale spending.
Key Findings at a Glance
The study presents several important insights:
1. Cashless payments significantly increase latte factor behaviorThe convenience of digital transactions encourages more frequent spending, often without careful consideration.
2. Financial literacy also shows a significant influence
Individuals with higher financial knowledge still engage in small expenses but tend to keep them within controlled limits.
3. Mental accounting shows no significant effect
Simply categorizing income and expenses does not strongly reduce repetitive small spending habits.
Statistical analysis further shows that these variables collectively influence spending behavior, although they explain only about 11% of the variation. This indicates that other factors—such as lifestyle, income, and social influence—also play a major role.
Why Digital Payments Encourage Spending
One of the most notable findings is the psychological effect of cashless transactions. Digital payments reduce the “pain” of paying, making spending feel less tangible compared to using cash. As a result, individuals are more likely to make repeated purchases without fully realizing the cumulative cost.
This effect is particularly strong among Generation Z, who are highly familiar with smartphones and digital ecosystems. Coffee shops, which often integrate digital payment systems and promotional offers, further reinforce this behavior.
Financial Literacy: Awareness Without Restraint
Interestingly, the study shows that financial literacy does not always lead to reduced consumption. Instead, it enables individuals to manage their spending more consciously.
Many respondents with higher financial literacy levels continue to buy coffee regularly because they feel financially capable of doing so. Their spending is not driven by ignorance but by perceived control over their finances.
As Insani and Putikadea from Universitas Negeri Surabaya explain, individuals with strong financial understanding remain aware of their spending patterns and can keep them within reasonable limits, even when engaging in routine purchases.
Real-World Implications
The findings offer valuable insights for multiple stakeholders:
- For individuals: Awareness of small, repeated expenses is essential for long-term financial health. Even minor daily purchases can accumulate into significant costs.
- For businesses: Coffee shops and digital payment providers can leverage this behavior by offering seamless payment experiences and targeted promotions for Gen Z consumers.
- For policymakers: Institutions such as financial regulators and banks should strengthen financial education programs, focusing not only on knowledge but also on behavioral awareness in the digital era.
The study also suggests that future research should explore additional variables such as income level, lifestyle, and social media influence to better understand spending behavior in the digital age.
Author Profile
Nazzanin Kamila Insani is a researcher specializing in financial behavior and consumer economics at Universitas Negeri Surabaya. She collaborated with Insyirah Putikadea, an academic focusing on financial literacy and economic decision-making. Both authors actively study the financial habits of Generation Z in the context of digital transformation.
Source
Insani, Nazzanin Kamila & Putikadea, Insyirah. (2026). The Influence of Cashless Society, Mental Accounting, and Financial Literacy on Generation Z’s Latte Factor Behavior at Coffee Shops in Surabaya. Formosa Journal of Multidisciplinary Research, Vol. 5 No. 4, 1185–1204. DOI: https://doi.org/10.55927/fjmr.v5i4.58, URL: https://journalfjmr.my.id/index.php/fjmr
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