There were a lot of great things in the 70s, flares, discos, the Ford Capri, but the most interesting may be the humble leather wallet stuffed with cash. Now, obviously anything stuffed with cash is pretty good, but what’s really interesting is that an old wallet could show us the future of banking and payments.
Today less than a third of our spending is cash and over 89% of us are paid direct to bank accounts. Money for the majority is digital, we get paid and we make most of our payments electronically. We never see or touch most of our hard earned cash and the key feature of a modern wallet is how many plastic cards it can hold, with a few notes reserved for incidentals. We’ve become distanced and disconnected from our money but back in the 70s cash was king and the wallet was a surprisingly sophisticated money management tool.
In the 70s many would start the week with a fixed amount of cash in their wallet. Most payments came out of that single wallet and every payment provided instant, simple and intuitive feedback on the cash remaining, based on a quick glance at the thickness of remaining notes. So, when someone asked if you wanted to go to the disco, this was the 70s remember, you already had a pretty good idea if you could afford it or not. If it was a close run thing, you simply checked your wallet to get an accurate view. The beauty of a cash wallet is that every payment provides a subtle but constant reminder of how much money you have left. When you’re connected to your money in this way then you always have the knowledge to make day to day spending decisions, which means that you’re truly in control.
Since the fab 70s the gradual move towards electronic payments has distanced us from our money. Today many day to day spending decisions are based on how much money we think we have and we all know the unpleasant experience of checking our balance to discover the gap between perception and reality.
Traditional electronic payments don’t provide instant feedback on the impacts of our spending, but as we move towards mobile money there is a fantastic opportunity to recreate the power of a cash wallet and much more besides. Today’s mobile banking has brought convenient account management to some but a digital smart wallet has the potential to transform the customers banking experience. Mobile banking is about payments, current and savings accounts, debit and credit card statements, etc. The smart wallet is about intuitive money management, providing control and transparency in the short and long term.
Imagine that every time you make a payment you get instant feedback on what you’ve just spent, how this compares to last week, and how this may impact future spending. When you pay for lunch you get a little reminder that, this week, you’ve spent more than expected and that may leave you short before pay day or impact your holiday plans. I now have the knowledge, and maybe tomorrow I’ll economise a little, or when someone asks do I want to go for a drink then I’ll decide to be good or I’ll go for it anyway but at least I won’t be so surprised at the end of the month. Maybe making a large purchase, like a new TV, might result in an offer to spread the payments over 6 months because next month the car insurance is due. Just like a cash wallet every payment is an opportunity to actively engage with your money, but with a much wider horizon and much deeper understanding of your needs and desires.
The smart wallet is a combination of spending history, mobile payments, scheduled payments, forecast spend, etc wrapped up in an intuitive service that is accessed from my mobile phone, tablet or internet depending on what I’m doing and where I am. The foundation is the move from cards to mobile payments – creating the channel for feedback and making every payment a real opportunity to engage and manage our money as we want.
This is more than exposing current banking services in mobile and adding a sprinkling of mobile payments. Digital money and electronic payments need to have the same level of visibility as cash in a wallet. The banks have an incredible resource in the spending history they already hold for all of us and this could be used to help each of us build an informed, dynamic view of our digital money. Analysing previous years would allow the bank to predict regular but occasional events, such as annual insurance premiums. Combined with scheduled payments and other regular spending the bank could offer a forecast of future spending which the customer could then tailor to their exact needs. This forecast of planned and unplanned future spending would give the customer a view on their money not looking backwards but forwards, providing the knowledge to make day to day spending decisions. Building this kind of knowledge and feedback into everyday payments recreates the value and simplicity of a cash wallet, but rather than being limited to a week at a time I am now connected to my money today, tomorrow and into the future.
The smart wallet is about my bank helping me, rather than them, to manage my money by bringing digital money into the everyday real world, just like cash stuffed into a leather wallet in the 1970s.
The good news is that although the 70s classic “2001: A space odyssey” may have been a little optimistic in its vision of the future the signs are looking good for the smart wallet. The first balance forecast services are starting to appear, with Simple banks ‘safe-to-spend’ monthly view and KeyBank’s recent launch of ‘mycontrol banking’ centred around the ‘mymoney forecast’ service. Movenbank may prove to be the first of the next generation. Their ‘Spend, Save, and Live’ service combines multiple accounts and credit cards to provide ‘the most complete insight into your spending’ with the aim of ‘helping you to learn more about your money and know how much you really spend so you can spend smarter and save more’. Exciting times, if these types of rich personal financial management services can be brought into the real world by making that intuitive link via the act of paying then we will be on the road to a truly smart wallet.