This post is not about imagining a financial inclusion nirvana, that would be far too easy. Instead, it is about the role of imagination in digitizing money, specifically, how people imagine and assign roles to the money in their hands (or digital devices) as a way of negotiating between their current and future selves.
Let´s not fool ourselves: these days we are having great success in digitizing remote payments but not money itself. I say this because most transactions start and end in cash, most digital accounts are empty, and most people only think of digital money services to undertake a limited set of remote transactions, but not their everyday transactions.
While digitizing payments is a matter of moving money around more conveniently and reliably, digitizing money is about preserving a sense of control over one´s money and especially money gaps (money you know you’ll need but you don´t yet have). In this case, the core challenge is giving people the tools to manage the trade-off between discipline (preserving saved money, not borrowing when circumstances don´t warrant) and flexibility (being able to access liquidity as needs arise). Digitization that lowers payment frictions and broadens payment acceptance may actually make it harder to make money feel more manageable between payments.
Money management is often seen through the lens of the interaction between a virtuous, future-oriented you (a judgmental voice that strives for discipline), and a venial, present-oriented you (who argues for, and too often succumbs to, flexibility). Digital money solutions are usually conceived to talk to and empower virtuous you: carefully evaluate your options, explicitly state your goals, accept illiquidity. That´s why most money management apps feel so schoolmarmish. They are not for people like venial you, which is what you are most of the time. It´s tiresome to be treated like the angel that you know you are not.
My sense is that money management services need to be much more about venial you. That’s the guy who needs most help, and that´s the guy who is making most money decisions anyway. Because the decision to be virtuous and set money aside is made once, but the decision not to raid that money is made continuously thereafter.
The decision to be virtuous and set money aside is made once, but the decision not to raid that money is made continuously thereafter.
It is important to understand that virtuous you is not necessarily better than venial you. Venial you is more attuned to the importance of the little rewards that you give yourself to sustain you day-in, day-out; to the value of creating little, spontaneous, memorable family moments; to the resilience of social networks built on showing gratitude and loyalty to friends and neighbors; to the importance of signaling success to those around you. You need both of you, and that´s why evolution put both there.
Understand that when you are poor and face a bleak and uncertain economic outlook, virtuous you locking up liquidity can be seen by venial you as an open act of sabotage. The implication is that money management systems that sell illiquidity will always fail to engage venial you. These money management systems have picked a side. So rather than getting venial you to cede ground to virtuous you, their effect is for venial you to tune out. Send all the SMS reminders you like, venial you is just not listening.
The objective of money management tools has to be to structure a continuous conversation between virtuous you and venial you. And you do that with stories. Help virtuous you and venial you develop and agree to a story for each potential liquidity source (whether entailing dis-saving, borrowing, or reciprocity). That helps, because at any point in time the decision of whether to exercise flexibility or maintain discipline comes down to which of these actions is most consistent with the agreed story.
The objective of money management tools has to be to structure a continuous conversation between virtuous you and venial you. And you do that with stories.
What type of story each type of money gets depends on many factors. First: where did it come from? Money that you worked hard for is not the same as money that you got as a windfall; money that you borrow from your employer is not the same as money you borrow from the moneylender. Second: what is it for? Is it for survival, for the future of my children, for guilty pleasures? And third: where is it stored? It may be deposited in some kind of receptacle, invested in a reciprocal relationship, or supporting an ostentatious display of wealth and success. A good story requires that all these aspects be joined up. That’s when the financial service that holds or unlocks the liquidity is consistent with its origin and destination. That´s why you put inheritance moneys in jewelry and not in a jar.
The main heuristic model that people use when deciding whether to call on some liquidity source is then whether the purpose sought for it is consistent with the story developed around it. Yes, I will draw down on the school fees fund to pay for a hospital visit for my child; no I will not use it to have some fun on Friday with my friends. That’s why informal money services are so powerful: the liquidity instrument (whether a set of jars, a lock box, a cow, a money guard, the savings group I can borrow from) act out the story of the money they hold within.
Money management is then a morality play between virtuous you and venial you, where the supporting actors are all the different liquidity pools you might access. The morality is not about right and wrong, but rather about consistency with the stories we´d told ourselves prior.
Financial management tools should therefore invite us to spontaneously develop these money stories, to play them out, to interrogate them every time venial you is acting up. You see how this links into imagination. We put order in a chaotic world through our imagination. A vivid imagination is our last remnant of control in a world that we have increasingly come to realize is out of our control.
Digital accounts are story killers. They are empty of emotion, they do not invite our imagination. That´s why the only fallback towards discipline is budgeting. Which, by the way, is a framework of “storifying” money, but a particularly boring one.