Stories | April 25, 2017

A hidden truth behind mobile payments

Before you split the bill with your friends using your “digital wallet”, perhaps you should think again.

When I was a kid, we used to play football in the schoolyard. My friends and I knew exactly what to do: we would meet in the main square every day after school, then head towards the playground and run until the sun went down and darkness fell.

Right after the match, both the losers and winners would eat pizza together. Sometimes the losers would pay for it – because they had lost the match. Other times the winners paid, after all, they had won. No mobile phones, social media or digital wallets were required. Everyone just “knew” what was fair.

The money itself was not a big deal; the trust we shared was the important thing. Breaking the rules – refusing to pay when it was your turn, for example – would have been cause for shame or even regret.

Economist Samuel Bowles in 2003 book Microeconomics: Behaviour, Institutions, and Evolution writes that human beings  – far from being rational self-interested individuals – are prone to altruism and cooperation.

Imagine you are at a restaurant with your friends and you ask for the bill. Would you be happy to pay the bill, in its entirety, every single time? Or would you be content to split the bill evenly, after ordering a lot less than some of your friends?

Chances are, you might accept this situation once, perhaps even twice, but after that you’d probably feel a little put upon. You might feel this situation to be unfair. Nobody likes a freeloader.

The money itself was not a big deal; the trust we shared was the important thing.

But things are now set to change. When it comes to splitting shared bills, many younger people are changing tack; they are making even more intensive use of their smartphones. According to ING International Survey Mobile Banking 2016, 86% of mobile device owners aged 18-24 in Europe have used their mobile devices to buy something – up from 72% in 2015. That’s a rise of 14 percentage points.

There is clearly a commercial opportunity, especially when it comes to mobile wallets – portable gadgets that can be used for a range of financial transactions. In fact the technology is becoming ubiquitous: younger generations have coined new phrases for casual conversation associated with their use.

For instance, rather than saying "this time it's on me, next time it’s on you", some might say "I’ll venmo you” – Venmo being a popular mobile payments app. In the past, many people might say, “let’s split the bill”, or something like that.

No doubt, digital wallets and mobile payments can be faster and more convenient than old ways of paying. But most things have down sides. What if these technologies reduce the need for people to trust each other? The end result might be a more individualistic, transactional society.

Indeed, research shows that mobile phones may have a considerable impact on our societies, although yet more research is needed. Hans Geser, a professor at the University of Zürich, concludes in a 2004 paper that mobile phones can “encourage emphasis on highly segregated bilateral relationships, while larger multilateral allegiances are losing ground”.

The inference is that mobile technologies, including mobile wallets and apps, may have a big effect on established social systems and institutions and sometimes may even weaken our relationships with other people, rather than strengthening them.

Samuel Bowles in his book, mentioned above, writes that the “rules of the game” and how individuals experience society’s “games” matter. In other words, how we interact with each other can change what we expect or need from other people in future.

Not only are new technologies changing the ways we pay but they might, in the end, affect us in other ways as well; trust is crucial in every human relationship. So will mobile payments have a bad effect on us, long term? Think about that, next time you’re out with friends.

eZonomics team
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