Why money habits die hard

by Joan Warner

Among the activities I most detested as a little kid was accompanying my mother to get cash from our local bank. Mom usually made these visits on Friday afternoons. We stood in line for several thousand years while I squirmed and whined, seething at the customers who insisted on making small talk with the tellers before collecting their money. Occasionally people would estimate, out loud, how much cash they’d need for the weekend, a practice I found immodest, like letting your underwear show.

bank_thumbAs it happened, ATMs appeared the very year I joined the workforce. When I started earning money, I never had to wait in line for it. Nor did I have to guess how much I was likely to spend over the next few days. I could fill my wallet anytime, anywhere—even if I’d already bought a few more drinks or books or records than I could really afford. Technology had radically and forever changed the way people use money.

Or had it? My peers and I still paid for things mainly with cash. Like our parents, we wrote checks to our landlords and the phone company. When we’d been working long enough to qualify for credit cards, we used them for big-ticket items and special occasions—just like our parents. Then personal computers and laptops knocked out checks by letting people pay bills online, while debit cards with rewards encouraged shoppers to use plastic even for small purchases. But strangely, technology hasn’t significantly altered consumers’ perceptions about what constitutes a reliable store of value.

New Oxford Economics research into global payment trends reveals that despite the near ubiquity of mobile phones and tablets, mobile payment remains relatively rare. Sure, a handful of retailers in wealthy nations have developed popular payment apps. And some developing countries are using mobile technology to bring the unbanked into the financial mainstream. Yet overall, cash and cards still dominate—even among Millennials.

It might take another generation or two, and maybe longer, for payment preferences to catch up with tech. That’s because people feel as strongly about money as they do about sex, religion, and other dinner-party conversation taboos. According to Freud, we believe on a deep level that the money we earn is part of us (one reason we don’t like parting with it). Trusting others with it is psychologically difficult—which may be why the very elderly, when their emotional and intellectual defenses begin to weaken, often suspect family and caregivers of stealing from them. Shifting trust from one entity or system to another requires hurdling a high psychic barrier.

Mobile payment providers will have to persuade consumers that their technology is reliable. Most important, they must reassure users that mobile money cannot vanish into thin air. There’s a reason metal coins have been around since 700 BC. They lie in the hand with satisfying weight. They jingle musically in the pocket. They can be tossed, skipped, and flipped. When money has no substance and can move from one place to another in nanoseconds, nobody has to wait in line for it. But I wonder how soon consumers will really believe in it.

Joanie Warner is the Thought Leadership team’s Managing Editor for financial services.