As technology advances, people are getting further from the hard concept of money. Without seeing immediate feedback, people repeat undesired behaviors without having any pain. The tendency to repeat previous behaviors without thinking of the original motivation has been observed (Ariely, D. & Norton, M. I., 2008). This behavior may cause repeated purchases without adequate deliberate decision-making.
This problem is exacerbated by the reduction of the pain of paying as the distance from physical currency increases (Ariely and Silva, 2002). We are increasingly moving towards electronic payments and this trend will not reverse (Borzekowski, Kiser, Ahmed, 2006).
The convenience of credit and debit payments directly reduces pain, in combination of self-herding leads people to inadequately consider other aspects of the purchase. With the exception of frugal individuals, people do not automatically think about the opportunity cost of making purchases (Frederick, Novemsky, Wang, Dhar, Nowlis, 2009). This effect is especially prevalent when the opportunity is far in the future, such as saving for retirement savings.
Modern technology is reaching a point where we can introduce moderate psychological pain based upon the spending, or even create a psychologically rewarding experience based on positive spending. Square and Google Wallet to allow payment via smartphone and the upcoming Coin Wallet, a digital credit card "adapter" are becoming more popular.
I propose a small user experience enhancement on these trending, youth-friendly payment methods that provide immediate qualitative feedback based on the type of purchase or the category. Based upon the purchase, accounting for category and other rules, the payment device should signal to the user in easily understood ways. For example, if a person purchases a second cup of expensive coffee, the payment device could turn a vibrant red and require a tap to acknowledge a message encouraging savings. Conversely, purchasing groceries and staying within a predefined budget could emit a pleasing green glow.
References
Ariely, D. & Norton, M. I. (2008). How actions create—not just reveal—preferences. Trends in Cognitive Sciences, 12(1).
Ariely, D., & Silva, J. (2002). Payment Method Design: psychological and economic aspects of payments. Center for ebusiness@ mit. Presented November, 13, 2002.
Borzekowski, R., Elizabeth, K. K., & Shaista, A. (2008). Consumers' use of debit cards: patterns, preferences, and price response. Journal of Money, Credit and Banking, 40(1), 149-172.
Frederick, S., Novemsky, N., Wang, J., Dhar, R., & Nowlis, S. (2009). Opportunity Cost Neglect. Journal of Consumer Research, 36(4), 553-561.
Funny little piece. Is the author suggesting a shock or annoying nagging reminder to the irresponsible spender?