Independent Banker - December 2018 - 58

better decisions. She
cites the example of
Uber, which used to
make customers enter
the surge rate before
requesting a ride
at times when high
demand resulted in
president and CEO of ICBA Bancard. Yet there
aren't really restrictions on transactions.
While PFM tools create a painful reminder
that money fl owed out of an account, Shah sees
higher-than-usual pricing. Entering the fi gure
avoided unpleasant surprises for passengers.
Community banks could leverage this concept
by allowing consumers to set an upper limit for
purchases, perhaps $50 or $100, and then be
required to enter the cost of any purchase over
that threshold.
On the road to change
Many community banks and apps already off er
personal fi nancial management (PFM) tools
that allow customers to budget and track their
spending by categories, notes Tina Giorgio,
room for improvement.
" The more concrete reminders, the more
pain after the fact, " she says. " I'd like to see
email reminders saying, 'Your purchase was
approved,' and then showing the cash quantity.
You'd get something that says you just spent
$104 with a picture of a $100 bill and four single
dollar bills. I've always wanted to do that study. "
While cash will remain an important part of
the U.S. economy for the foreseeable future (see
The Ledger on page 12), noncash payments
will continue to evolve and make it easier to
overcome barriers to spending. The key will be
helping consumers understand that pain can be
a good thing.
Kelly Pike is a writer in Virginia.
10%
Drop in
spending
when study
participants'
credit card
receipts
listed their
cumulative
spending for
the month and
their current
credit card
debt
What is 'mental accounting'?
A lot of the pain of paying comes from
mental accounting. That's the act of
assigning diff erent values to diff erent
piles of money, says Dr. Avni Shah of the
University of Toronto Scarborough.
Here's an example. Think about
transferring $25 to a Starbucks gift
card. The consumer will feel pain when
transferring the money out of their
checking account, but once the money is
on the gift card, in their mind, it's spent.
They'll feel less pain using the gift card,
because they've already made a down
payment on their pain.
The same thing happens at the ATM.
Some people feel the sting of withdrawing
money because they see their account
balance go down-even though they
technically still have the same amount of
money. Knowing they have plans to spend
the money is enough to make them feel
like it's already been spent.
" Just taking money from an ATM shouldn't
be painful, because money should be
fungible. It shouldn't matter what form it's
in, " says Shah.
Understanding
these pain
points can help
community
banks guide
consumers to
make better
decisions.
58 Q ICBA Independent Banker Q December 2018

Independent Banker - December 2018

Table of Contents for the Digital Edition of Independent Banker - December 2018

Table of Contents
Independent Banker - December 2018 - Intro
Independent Banker - December 2018 - Cover1
Independent Banker - December 2018 - Cover2
Independent Banker - December 2018 - Table of Contents
Independent Banker - December 2018 - 2
Independent Banker - December 2018 - 3
Independent Banker - December 2018 - 4
Independent Banker - December 2018 - 5
Independent Banker - December 2018 - 6
Independent Banker - December 2018 - 7
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Independent Banker - December 2018 - 12
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Independent Banker - December 2018 - Cover3
Independent Banker - December 2018 - Cover4
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