gistfile1.md

Leveraging Technology to Increase Pain of Paying, and Improve Personal Savings

As technology advances, p_P_eople are getting further from the hard concept of money. Without seeing immediate feedback, people repeat undesired^{by whom?} behaviors without having any pain^{better word?}. The tendency to repeat previous behaviors without thinking of the original motivation has been observed (Ariely, D. & Norton, M. I., 2008)^footnote?. This behavior may cause repeatedmay increase purchases without adequate^{with inadequate?} deliberate decision-making^{deliberation?}.

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).^{Isn't this correlating physical proximity with conceptual proximity?}

The convenience of credit and debit^{s/credit and debit/card/?} payments directly reduces pain, in combination ofand self-herding^{citation or explanation?} leads people to inadequately consider other aspects of the purchase^citation?. With the exception of frugal individuals, people do not automaticallytend not to think about the opportunity cost of makingtheir 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^{seems like the conclusion also warrants a citation or data}.

Modern t_T_echnology is reaching a point where we can ^re?introduce moderate psychological pain based upon theon 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"^{future tense vs suggested historical trend} are becoming more popular.

I propose a small user experienceinterface enhancement_s_ onbe introduced to these trending, youth-friendly payment methods that provide immediate qualitative feedback based on the type of purchase or the category. Based upon the purchase, a. _A_ccounting for category and other rules, the payment device should signal to the user in easily understood ways^{shuffle sentence order to inline examples}. 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.

gistfile2.md

Leveraging Technology to Increase Pain of Paying, Improve Personal Savings

The concept of money as a tangible commodity is eroding due to the increased use of credit cards and digital forms of payment. Without immediate feedback, people repeat detrimental behaviors without pain. The tendency to repeat previous behaviors without thinking of the original motivation^[1] may increase purchases made without adequate deliberation.

This problem is exacerbated by the reduction of the pain of paying as the distance from physical currency increases^[2]. We are increasingly moving towards electronic payments and this trend will not reverse^[3].

The convenience of card and digital payments reduces pain, and self-herding leads people to inadequately consider other aspects of purchases. With the exception of frugal individuals, people tend not to think about the opportunity cost of their purchases ^[4]. This is especially prevalent when the opportunity is far in the future, such as retirement.

Technology is reaching a point where we can introduce moderate psychological pain based on spending, or create psychological rewards based on positive spending. Square and Google Wallet, which allow payment via smartphone, are becoming more popular and provide opportunities to introduce this feedback via their user interfaces.

I propose enhancements to these trending, youth-friendly payment methods to provide immediate qualitative feedback based on the type of purchase. Accounting for category and other rules, the payment device should signal the user in easily understood ways, such as turning red and requiring a confirmation when buying a second cup of expensive coffee, or conversely, glow green when staying within a budget while purchasing groceries.

References

[1] Ariely, D. & Norton, M. I. (2008). How actions create—not just reveal—preferences. Trends in Cognitive Sciences, 12(1).

[2] Ariely, D., & Silva, J. (2002). Payment Method Design: psychological and economic aspects of payments. Center for ebusiness@ mit. Presented November, 13, 2002.

[3] 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.

[4] Frederick, S., Novemsky, N., Wang, J., Dhar, R., & Nowlis, S. (2009). Opportunity Cost Neglect. Journal of Consumer Research, 36(4), 553-561.