My 4-year-old son is obsessed with cool. Let’s be clear: His understanding of the concept is limited. He knows it’s positive. He knows his friends say it about carnivorous dinosaurs. He knows its alternate use—opposite of warm—but he’s lukewarm on that usage.
Instead, he keeps asking me: “Dad, is this Lego cool? Is that cooool? Do you think this one is so cool?” I’m tempted to have a conversation with him about value and the human impulse to judge things as attractive, fashionable, or somehow-or-other impressive, but he’s just not quite ready. Maybe when he’s 5. And when he’s 6 we can delve into the pitfalls of grossly overused adjectives.
His interest in cool has come to mind recently because the tech world has the same obsession—and it isn’t always a good thing. One criticism I have of tech culture that applies to money-related startups is that supposedly disruptive ideas and innovations often fail to do anything more than offer already wealthy people a slightly different way to wirelessly transfer value when buying a coffee.
That’s not to say that innovation has to have lofty goals to matter, that it has to be about the bottom of the pyramid and financial inclusion for it to be anything but navel gazing. That would be ridiculous. But there is often a real disconnect between what consumers want and need, and what companies are developing for them.
In the payments space, for instance, a common refrain is that we want to reduce the friction—the cost—of money, whether that cost is due to fees, time delays, security vulnerability, or something else. Some tech people take this language even further. At Wired Money last year, a PayPal executive said payments should be completely invisible. Chris Teso, founder and CEO of the pioneering social-commerce startup Chirpify, has said that buying should feel like shoplifting. [Disclosure: I once ran a book sale promotion through Chirpify.] I think these smart people, and many other thought leaders in the world of digital money, are conflating invisible and frictionless in a way that is unhelpful, and that could even be hazardous to both their brands and consumers.
The reason is the economics concept of willingness to pay and its close cousin, so-called pain in spending. Our decisions about spending (and saving) often differ depending in part on the different forms of money we are dealing with and their associated frictions. Similarly, the experience of relinquishing funds catalyzes a different emotional response depending on the form of money. When you hand over 100 euros in cash, it feels different than paying 100 euros with a debit card, which feels different from wiring 100 euros between bank accounts, especially if that wire transfer costs 15 euros. Ouch. This variation in turn influences our financial behavior, and not always for the better.
Technologies to reduce the friction of money are awesome. We need more of them, and those who bring them about could make heaps of money while providing tremendous social and economic benefit to the masses. But making payments feel like nothing at all could do just the opposite. People aren’t good money managers. We already have trouble budgeting, saving, and investing. (Check out this alarming story about Turkey.) If spending feels like shoplifting, we may not lose precious time in our day while making a purchase, but we may and up losing our shirts. That would not be cool.
What we need instead are 21st century tools for transacting that simultaneously make us more savvy financial actors. Put another way, we need innovations that nudge us a little toward homo economicus and away from our affable but notoriously irrational selves. This is one reason why I like Simple, the online banking startup that was recently acquired by BBVA. Features like Safe to Spend, Locked Goals, and real-time updates about money going out and coming in put all kinds of new data—and power—in the hands of the customer. It almost sounds like fantasy: A bank that wants to make money not by confusing you, but by helping you behave more responsibly. (Read a little more about this thesis here, or for that matter in my book.)
Next week, I will be at the Innovation Project, put on by the folks from Pymnts.com. Amidst the flood of new ideas and services being pitched, perhaps a few will elegantly combine the quest to reduce the friction of money with the goal of empowering consumers to make smarter choices. Now wouldn’t that be cool?
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David Wolman is a contributing editor at Wired and the author, most recently, of The End of Money: Counterfeiters, Preachers, Techies, Dreamers—and the Coming Cashless Society. Follow him at @davidwolman.
