Independent Banker - December 2018 - 57

Easing the pain of saving
Noncash payments make it easier
to spend, but they also make it
easier to save.
A variety of apps already
help consumers budget, track
spending and save money. Some
send texts with updates on
account balances, while others
round up transactions to the
nearest dollar and sweep the
diff erence into a savings account.
Consider Qapital, which off ers
Qapital-branded debit cards
issued by $1.2 billion-asset Lincoln
Savings Bank in Cedar Falls,
Iowa. (The community bank also
partners with Acorns Spend to
off er a checking account with
a debit card that automatically
saves and invests microinvestments
through roundups
and recurring investments.)
Purchases on the Qapital credit
card trigger " defaults " -automatic
transfers-between a linked
checking account and savings
account based on rules that the
consumer sets.
For example, the " spend less "
rule could let a customer save
the diff erence if they spend less
than $20 a week at Starbucks.
Or the " guilty pleasure " rule
would transfer a set sum to the
customer's savings account every
time they orders takeout.
" One of the reasons defaults
work is because you're not making
a decision. That's even better than
contactless payment, because
you never saw it happen, " says
Dr. Avni Shah of the University of
Toronto Scarborough. " You don't
see the pain. "
Another default, proposed by
Emory Nelms of the Center for
Advanced Hindsight at Duke
University and piloted at several
financial institutions through
Hindsight's Common Cents Lab,
is tying savings to other payment
systems. For example, if a bank
customer has a monthly auto
loan payment of $213, they could
work with the bank to make the
payment $250, diverting the extra
$37 into a savings account to
cover car maintenance.
" You combine it into one
payment so you don't feel the
pain, " Shah suggests.
Doing good-easily
The same forces that make it easy
to spend and save also make it
easy to donate to charity.
In Sweden, celebrated as the
world's most cashless country,
more than half of bank branches
no longer hold or receive cash. At
least one church is conducting a
pilot where it no longer accepts
cash off erings at worship services,
instead relying on popular
payment app Swish, which was
developed by the country's
major banks.
And even
panhandlers in
Sweden have
been known
to accept
donations
via Swish.
much allowable spending was left. Testing the
prototypes in a lab with mock data, the CFPB
found consumers were less likely to buy concert
tickets when the app's graphics showed they
would go over budget than they were when they
received that information in text form.
" The [card and app] made me aware of it
actually being money that I'm spending, where
a regular card sometimes feels like it
is free, " remarked one of the nine
participants in the CFPB study.
Nelms calls these cues " moments of
refl ection. " They are opportunities to remind
consumers of the pain of spending-to
create friction.
For instance, a community bank could
piggyback on existing fraud-alert technology by
sending a consumer a text asking her to confi rm
that she wants to spend $50 when there is only
$300 left in her account, says Nelms.
Shah also believes adding friction to the
purchase process can help consumers make
31%
of U.S. consumer
transactions
are made
in cash
Source: Federal Reserve
independentbanker.org Q 57
http://www.independentbanker.org
Independent Banker - December 2018

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