Tremendous resources have been invested in creating technology that makes it easier for people to pay, both online and in person. The reasons for this investment are obvious. The easier it is for someone to buy something and pay for it right away, the fewer obstacles there are to make a sale. One need only consult the nearest online entrepreneur to learn how important making things easy for customers is.
The catch-all term for these new, faster ways to transfer funds from customer to merchant is “frictionless.” It refers to the fact many of these payments, even the ones that take place in person, can be made with a single tap of a button or a single contact between two physical devices. Fiddling and navigating interfaces is reduced to the absolute minimum and in some cases, eliminated entirely.
The problem with being able to spend money easily is what happens when you run out of money to spend.
There is a large and well-provisioned constituency for convenient payments. It consists of all the business owners in the world who want to make it easy for their customers to hand over larger and larger amounts of money. Therefore, it can be said that these kinds of payments risk becoming a one-way technology. They might benefit business owners by incentivizing customers to overspend, but they don’t do much to protect those customers from spending money they really don’t have. The good news is one-way technologies can be easily adapted.
Frictionless Savings – The other side of the coin
Some companies are already beginning to make use of another term – frictionless savings. The idea is that every payment is paired up with a tool that takes a percentage of what was paid and silently drops it into a savings account or better yet, purchases shares of a mutual fund with it.
Conceptually, frictionless savings tools could be deposited into an account protected from being raided by the owner too often. With appropriate preparations, people could easily find themselves with hundreds of dollars in savings at the end of every month, regardless of how easily they could pay at the register or at an e-commerce site.
The problem with these systems is like the problem with credit cards in general or even checks in casinos. The moment your money stops looking like money or worse yet, becomes completely invisible, the easier it is to imagine you really aren’t spending that much, or to imagine you have far more than you do. Frictionless savings make use of this phenomenon for positive reasons, but ultimately the problem is one of awareness. BMG Money encourages our loan customers to keep aware of what is in their accounts, whether their primary spending is done online or in-store.
Something as simple as a picture of the cash they are about to spend might be enough to jolt some people out of the dream world they inhabit when their mobile phone deducts a big hunk of their last paycheck from their account.
Technology is a neutral tool. It can be used for good or bad. The key to a brighter future is to recognize the difference and utilize what is available to protect your property and financial opportunity.