Will mobile payments make us irresponsible?

[Dave Birch] It’s undeniable that some people will spend more money digitally than physically. Studies and surveys have repeatedly found that for all kinds of psychological reasons, certain people will, in certain circumstances, spend a pile of cash more “responsibly” than a digital balance. It isn’t a goal of the industry to get people to spend irresponsibly. I can honestly say that in all of the projects I’ve been involved in over the years for payment schemes old and new, I’ve never heard anyone say that getting people to spend more is a goal. The goal is always about getting people to switch transactions from method A to method B. (For most of my clients right now I would say that method A is cash, cheques and other card schemes!) Nevertheless what does this mean? I think it means two things, and I’ll come back to them in a minute. But first I’ll explain why I’m thinking about them.

It’s because I went to Dinah Tobias’ excellent Payments Forward “Afternoon Tea Debate” on whether internet and mobile payments make it harder for young people to manage their money. As well as my professional interest in the subject, I also have a personal interest in it as the father of two teenagers, one at University and one who will be heading to University in a couple of years. Dinah had come up with a clever structure for the debate: she had invited IDEA UK to organise expert student debaters to speak for and against the motion and then had the audience ask questions at the end. They ran the debate under what were referred to as “Parliamentary Short Form” rules. I’d not come across these before. They didn’t seem to have much to do with the British Parliament, at least, since the students spoke intelligently, made interesting and well-informed points, were polite to each other and at no point yelled “rubbish” or ” hear, hear”, rustled papers or made irrelevant and offensive sexist comments.

IDEA UK’s panel included David Jones, a former International Mace finalist, Richard Robinson, former head debate coach at Eton College, Belize Harrison, President of the Inner Temple Debating Society, Ben Dory, European Championships finalist, Ioan Nascu, an IDEA trainer and former Romanian national debate champion, and John Harper, a debate coach and graduate of St Andrew’s University.

[From IDEA UK works with the Payments Forward network to discuss young people’s use of new payment technologies | idebate.org]

But I digress. The student debaters were excellent and, like many in the audience, I really enjoyed seeing a different format and hearing from different people. And some of the points that were made in passing struck me as rather interesting: I’m sure a lot of the bank delegates were scribbling down notes at the same rate that I was! For example, one of the students mentioned that they prefer mobile banking apps that display the account balance prominently before you make a transaction and another asked why receipts hadn’t gone electronic yet.

The discussions led me to think that there is an apparent block to industry (ie, our electronic transactions industry) progress. It is this: the lowest total social cost to society comes from, broadly speaking, PIN debit. So shifting away from cash is a good thing. Therefore society should make PIN debit the baseline. However, if we do this, many (but not all) people will spend more or find it harder to manage their spending. So shifting away from cash is a bad thing. What do we do? Is this a genuine paradox or are we not looking at the issues the right way.

Ben Dory made a very, very good point in his short speech. In fact, he neatly summarised the way forward for our industry. He said that mobile and online payments have the potential (and I stress, potential) to support people in making better decisions around spending. In some of our work on the connection between social and financial inclusion (e.g., for the Technology Strategy Board) we saw some fascinating early examples of this. I’m thinking about the work that UCL had done on graphic interfaces for apps to show people barometers of their spending and such like. If we can realise the potential that Ben referred to then we have a genuine win-win, providing people in general (not only students) with an electronic solution that is better than cash.

So, to wrap up, I said I think that the debate meant two things to me.

1. It meant that we don’t have the right apps yet and that there is a need for “social PFM” on top of basic payments.
2. It meant that people take time — a lot of time — to adjust to new money technology.

There’s plenty of opportunity here for both incumbents and new entrants to provide these tools, but a precursor to behaviour-changing use of the data is the provision of the data itself and this might turn out to be an excellent value-adding opportunity in the mobile wallet world. We talk a lot about providing APIs to retail apps to handle payments, identity, location and such like. But what about having the retailer apps provide APIs so that consumers can download software from the Consumer’s Association or the National Union of Students or Saga to look at their spending and provide them with trusted advice? Unfortunately, as others have found, not everyone is excited about the opportunities afforded by this level of data sharing.

The problem with personal financial management, or PFM, is that it needs all of a customer’s data to be truly worthwhile. But now holders of some consumer PFM data have begun to prevent Pageonce, which aims to provide worthwhile PFM, from incorporating their data into the Pageonce service.

[From PFMs, and Pageonce Specifically, Need Access to Data — and They’re Losing It | Bank Innovation]

I’m not saying this is going to be straightforward. It isn’t – no retailer wants to make it easy for competitors to find out what their customers have been spending and on what, but it will happen anyway (because the electronic receipt “OTTs” will do it) so it’s better to be inside the tent, pissing on the elephant who moved your cheese. Or something like that. Maybe the retailers can join the social PFM party as the good guys and help set some reasonable rules.

This, by the way, is what I would categorise as a “small data” play, and small data is one of our “hot five” transactions technologies for 2014. More about those later.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers