Designing Mobile Payment Experiences

Chapter 1. Bovines, Banknotes & Bytes

We tend to think of money as a mundane artifact, either in digital or tangible form, that we employ to get the things we want. It is a means to an end. For example:

I want a box of Twinkies.
I have a credit card.
I walk to the store, pick up a box from the snack aisle, and swipe my card.
Now, I’ve got Twinkies!

Easy, right? And sinfully delicious!

But why do we expect payments to be so easy? The circulation and settlement of these funds are accomplished behind-the-scenes by a complex web of protocols and institutions, but we only ever see the tip of the iceberg that makes our daily purchases possible. Speedy transactions are a consumer expectation that has been learned over the thousands of years we have been purchasing things, and so digital experiences in this space must facilitate easy exchanges in kind.

Primarily, financial apps should be simple and intuitive. Payments with a mobile phone have to be as fast and reliable as cash or cards, because we are already accustomed to making payments several times a day with various methods: cards, cash, the Web, and others. We expect instant gratification from these exchanges. We have become familiar with these payment methods and they have proven to be successful over time, superseding other forms (checks) that fade into obsolescence. As financial paradigms have changed throughout the centuries, the idea of what currency ultimately is has become more abstract. Within this evolution, designers in this space should look beyond the tangible aspects of a payment instrument to gauge success, and focus on wider value and practicality surrounding the payment as a system. I have found that in order for a payment system to gain prominence and endure in the consumer mindset, it needs to embody three basic traits:

Convenience: The medium of exchange must be practical, easy to handle, and easy to transport from the buyer to the seller. Historically, this aspect has been the driver of change as we seek ever-faster forms of payment.
Worth: It must have an established and measurable store of value, which is apparent to all parties involved in the transaction.
Stability: Before consumers even enter a store, they must have faith that their chosen payment method will be widely accepted, and maintain its worth and usefulness day after day.

Now, I don’t claim to be an economist or a cultural anthropologist, but in this chapter we will take a look at some historical developments in payment mediums through the lens of these three traits. To appreciate how our concepts of money have evolved, we should first look back to simpler times (Figure 1-1).

Convenience

A Long Walk to the Market

It’s the year 3050 BC. One dark morning, near what is now Dunning in western Scotland, a farmer is walking two of his cows down a muddy path along the River Earn. It had rained all night, which is typical on this side of the river, but the late September sun is beginning to peek through the low clouds. The cows’ long black hair is beaded with raindrops, and the farmer’s heavy steps sink in the valleys of water pooled in the rutted road. He is on his way to a settlement where the Earn joins the River Tay, near modern-day Perth. There’s an abrupt tug on the rope, as one cow stops to sniff the air. The farmer welcomes this reprieve. He’s walked this road twice this season, and with Samhain fast approaching, this will likely be his last excursion to the market before winter sets in.

Figure 1-1. A timeline of a few key developments in payment systems

He hopes to trade the cows for supplies that will get his family through the cold gray months, like oil for lamps, or wool for heavy blankets and clothing. He is especially looking forward to picking up some salted salmon, caught off St. Andrews by his wife’s cousin. If all goes well at market, at noon he can start the four-hour trek back home before dark.

It is difficult for us to imagine now, but this is an example of what might have been a typical shopping trip in early Western civilization. The farmer hopes that each local producer (the fisherman, the shepherd) will accept one cow in exchange for the goods he seeks: oil and wool from the shepherd, salmon from the fisherman. The farmer must rely on mutual trust that goods he is seeking are available in his community, and of good quality. He trades with the same vendors over a sustained period of time, and they become like extended family. These types of intimate interactions fostered community interdependence, and gave rise to the first markets.

Bartering and the Birth of Currency

Though we may never know when humans began to exchange goods, it is likely that neighborly favors and bartering (one-to-one trade of goods and services understood to be of equal value) was no doubt the starting point. Bartering eventually gave way to the rise of agriculture as a type of currency, as our communities grew larger and more prosperous. For example, farmers would raise more cattle than they needed for their own families, and then trade the extra cattle with nearby producers for other necessities, such as fish, animal fat for fuel, or sheep’s wool for clothing (Figure 1-2). Towns sprung up around crossroads, and routes were carved out to link culturally isolated populations—all to enable the trading of commodities.^[1] Bartering and commodity exchange was effective for simple transactions between two parties for goods perceived as equal in value. However, these exchanges were subject to timeliness or need, and so would lead to inconvenient redundancies. What if the fisherman had no need for more cattle? What if the shepherd had no rendered oil to spare? What if the shepherd felt that one cow was not as valuable as a bundle of wool? The farmer would have to hit the road to find other producers to trade with who needed what he was offering, or otherwise take the long walk home empty-handed.

Woodcut by Olaus Magnus, depicting the trading of tools, weapons, fish, and grain by 16th-century Nordic peoplesOlaus Magnus, History of the Nordic Peoples, On Trade Without Using Money, vol. 4, chapter 5 (1555).

Figure 1-2. Woodcut by Olaus Magnus, depicting the trading of tools, weapons, fish, and grain by 16th-century Nordic peoples^[2]

To address this, the concept of credit, and later of shared currencies, emerged in order to serve a logistical need for efficient commerce. From 2500 BC with the Mesopotamian shekel to the 12th-century hui-zi paper notes of the Song Dynasty, cultures around the world began to develop more convenient mechanisms to enable trade. Our farmer’s descendants likely relied on local, familiar merchants who knew them and would extend to them a line of credit, kept in the form of a written ledger, which could then be repaid in time with commodities or favors. By the time the Romans arrived in Britain, they would have begun paying with coins or other tokens, which were much easier to transport than two wet bovines, and were widely accepted by other members of his community.

All coins, big and small

The first coins would have been made from a malleable metal like silver or bronze, and stamped with the sigils of the local lord or Roman gods (Figure 1-3). Our friend the farmer could sell his two cows in the market for five coins, which he could take to the shepherd and the fisherman to pick up his supplies, and perhaps have one or two coins left over for savings (and, of course, taxes). The portability of coins contributed to their popularity across cultures, and they worked so well that we still use them to this day.

Figure 1-3. Lydian coins from 575 BC were some of the first to be minted at a consistent purity and mass (courtesy of Kwan Choi, Iowa State University)

Not all coins are so practical. One favorite story of financial nerds and currency anthropologists is from the island of Yap in the Western Pacific (between Guam and the Philippines), where the exchange of rai stones (Figure 1-4) gained prevalence 2,000 years ago. The rai ranged in size from small limestone beads to massive, 12-foot-wide wheels.^[3] Being impossibly impractical, they are used today in only ceremonial exchanges (e.g., weddings, political events, and estate transfers), and they are not usually moved from their bases. Rai coins didn’t propagate as a day-to-day currency due to their physical enormity, but we’ll talk more about them as an example of understood worth later in this chapter.

Figure 1-4. A rai stone coin, measuring about 12 feet in diameter (courtesy of Joshua Levin/Flickr [http://bit.ly/1j8XVOS])

Honey, I forgot my wallet

Let’s move ahead several centuries to a similar invention, born out of the pursuit of convenience. The first charge cards came about due to the need to rely on a trusted network to enable cashless purchases. Charge plates, an early version of the charge card, were tin plates similar to military dog tags that became popular in the 1920s and 30s (Figure 1-5).^[4] They were stamped with the name and address of the cardholder, who at the time of purchase could simply hand over the charge plate to the cashier, who would in turn imprint the plate onto a bill of sale. The raised lettering of charge plates has carried over to modern-day credit cards, though it is rare to find a card-imprinting slider at today’s point of sale (unless the power goes out). Charge plates were issued to the most frequent and loyal customers of department stores and gas stations, to enable them to put purchases on a tab that could be settled up monthly.

Figure 1-5. A charge plate belonging to Mrs. Ira B. Zasloff—note the stylish leather case! (courtesy of Ron Toth Jr., 2013)

This meant that customers didn’t have to carry large amounts of cash if they wanted to purchase a dining set or a washing machine. There was an air of prestige associated with charge plates, as they implied that one had the sort of income that would make one a frequent shopper at Bloomingdale’s or Saks Fifth Avenue. Still, it’s hard to imagine now having to carry around half a dozen tin plates in your wallet: one for each of your favorite stores.

That is when one of the predecessors of the modern general-purpose credit card entered the scene: the Diners Club card (Figure 1-6). In 1950, Frank McNamara’s Hamilton Credit Corporation issued the Diners Club card: a printed cardboard card that could be used at 14 participating New York City restaurants. The legend was that McNamara forgot his wallet one night during a business dinner and had to call his wife to bail him out, and he swore never again to be without an alternate way to pay for his tab (though this story may have been a myth created by McNamara’s business partner, Alfred Bloomingdale).

Figure 1-6. Alfred Bloomingdale’s Diners Club card (courtesy of Diners Club, 1954)

When the waiter handed you the bill at dinner, you would hand over the card, sign, and the bill would be added to your tab, which had to be paid in full each month. Diner’s Club skyrocketed in popularity, adding 20,000 cardholders and 1,000 restaurants in five major US cities within its first year.^[5] This was the first time a membership charge card could be used ubiquitously (at least for fine dining); most charge cards were accepted only at the individual retailers who issued them.

This “charge where I want” concept soon became the norm with credit cards, as large national banks got behind it (small regional banks had been providing charge cards since 1946) and began to issue their own cards to their customers. Bank of America’s BankAmericard launched in 1958 and would go on to become Visa.^[6] MasterCharge (later MasterCard) launched in 1969, formed by a consortium of banks including Wells Fargo, HSBC, and Union Bank of California.^[7] Augmented by the magnetic stripe and later the smart chip, plastic credit and debit cards made it effortless to make cashless purchases (for better or for worse). Execution of these card swipes is carried out via a system (Figure 1-7) that takes the cardholder’s account information and passes it from the merchant to the merchant’s bank to the card network (Visa, MasterCard, American Express, etc.) to the bank that issued the card to check for sufficient funds. Then, the issuing bank gives a positive authorization response back to the merchant’s bank (via the card network), which then notifies the merchant that the card is valid. All this back-and-forth takes just a few seconds.

How a credit card payment works (courtesy of UniBul Merchant Services);UniBul Merchant Services, “Submission Clearing and Settlement of Credit Card Transactions” (). it’s amazing that so many confirmations are communicated within seconds of swiping your card!

Figure 1-7. How a credit card payment works (courtesy of UniBul Merchant Services);^[8] it’s amazing that so many confirmations are communicated within seconds of swiping your card!

Now, of course, plastic cards are ubiquitous. In 2008, at the lowest point of the recession, the Federal Reserve of Boston conducted a survey of consumer payment habits. It found that 77% of US consumers use debit cards, and 72% have credit cards, with debit cards being the most preferred payment instrument, at an average of 19 purchases a month.^[9] Convenience drives popularity—consider that even in the middle of a recession, plastic cards were used for about three-fourths of all purchases.

With so many different ways to pay for things, we can now associate payment methods with different tasks. Like the charge plates a few decades before, it has become customary to have about six plastic cards in our wallets, each with a specific purpose: one for the gas station, one for travel, one for dining and entertaining, one for earning loyalty points, and so on.^[10] Bills and rent could be paid with checks, or wired via transfer services like Western Union. Cash could be used for everyday purchases like groceries or tollbooths. Consumers are now free to establish their own preferences for particular payment methods, according to the context and ease of use.

Paying with Bytes

The next time you visit your local shopping mall, stop for a minute and look around. Imagine you are a weary traveler, shopping at a 12th-century Roman market—they are not too dissimilar, after all. There is a busy central corridor, lined with merchants, each specializing in a particular inventory: clothing, food, jewelry, shoes, massage chairs, enormous cinnamon rolls, etc. What has changed (apart from the fashions in the windows)? Hardly anyone is using cash!

Our progression to a cashless society will be a slow but inevitable one. Today, about 80% of all payments (not just retail, but bills, too) in the US are done with cash,^[11] and 29% of us are carrying around about 20 to 50 dollars’ worth.^[12] That amounts to a lot of dollar bills floating around. For some, all these bills and coins are more of a hassle than an asset. Cash is not especially safe to carry in large amounts, and you generally get it from ATMs, which aren’t always around when you need them. Drawing cash from an ATM that is not provided by your bank will ding you with out-of-network fees. And there could be several thousand harmful bacteria floating around on each bill—blech!^[13] Coins have become a jingling annoyance, relegated to a glass jar as soon as we walk in our front doors, useful only for parking meters and laundromats. In 2013, the burden of carrying cash around sparked tense debates over the perceived redundancy of one of the most iconic US coins: the penny!^[14] Cash is familiar to us, of course, but is it worth the hassle? Technology has given us tools to avoid handling this clumsy, “dirty” money all together.

Anytime, Anywhere

As consumers are presented with digital methods for moving their money, how do these methods change how they pay for things? How have new financial technologies made their lives easier? What impact do these innovations have on how consumers manage and track their spending? Money is becoming more ethereal in nature...sometimes it’s just a bunch of ones and zeros.

The ecommerce revolution extended the act of shopping to a new plane of utility. The Internet created a dynamic medium for retailers to advertise and sell their merchandise to customers. This allowed them to reach a broader market, and enabled consumers around the world to browse their shelves without being restricted by store hours. Web superstores like Amazon.com and eBay sell vast amounts of goods without the buyers and sellers ever speaking to each other. Brick-and-mortar chains like Walmart and Target have followed suit, providing their customers with the chance to shop without leaving the comfort of their couches.

The possibilities are limitless. You can shop for anything online: groceries from a chain supermarket, shoes from Italy, guayabera shirts from Guatemala, rare books from Montreal, bacon-flavored potato chips, turtleneck sweaters for your pug, and more. It’s all at your fingertips, once you add your items to an online shopping cart and enter your credit card details.

Auction sites like eBay made the thrill of moonshot bidding a national sport. If your index finger is fast enough, you can scoop up that rare first-issue comic book you’ve been eyeing for years. Once your bank account is linked to PayPal, picking up discount items is a breeze. By 2000, 41 million Americans had begun purchasing products online.^[15]

This comfort with transacting online spurred consumers to trust their financial information with more versatile web-based tools. In 1994, Stanford Federal Credit Union was the first to introduce online banking to its account holders, who were employees of Stanford University in Palo Alto, California (Figure 1-8). Its customers would go to the bank’s website and encounter a virtual bank branch. They could check their balances, make transfers between accounts, and see their transaction history. Three years later, SFCU’s customers could use electronic payments to pay their utility bills.

Figure 1-8. Stanford Federal Credit Union’s website in 1997 (courtesy of Internet Archive)

By 2001, US banks had 31 million online customers.^[16] As with Internet shopping, the convenience of banking from home was the biggest draw. In less time than it takes to brew a cup of coffee, bank customers could transfer money to their savings accounts or pay a bill from their home computers. Compare that with the amount of time and effort required to conduct traditional banking tasks: getting in the car and driving to the local bank branch, standing in line for a teller, presenting an ID and bank account number, and filling out a form.

Consequently, our reliance on printed copies of our monthly account statements has waned, as has the use of paper in general. In 1995, the Federal Reserve processed 49.5 billion checks. By 2000, that number had dropped to 42.5 billion, while the number of people using online bill pay rose to 12 million households.^[17] In 2009, the Federal Reserve released a study that painted a dark picture for the use of cash and checks. By that time, the volume of checks processed was down to $29.5 billion. Compare that with the volume of debit and credit card transactions, which came in at $59.5 billion.^[18] Online banking was the perfect counterpart to this shift, as consumers could now track their spending by opening up their web browsers and sifting through their transaction histories.

The ubiquity of the mobile phone has changed the way we do a lot of things: how we communicate with each other, how we interact with the world around us, and how we manage our money. As we moved from desktops to laptops to mobile phones, banking has gravitated in kind. Financial institutions are not especially known for being behavioral “game changers,” but when banks began powering our phones with the same services we can get on our laptops (account balances, transfers, bill pay, spending alerts), it became much harder to be ignorant of one’s finances. The company I work for, Monitise, helped Royal Bank of Scotland (RBS) bring mobile banking to its customers’ mobile devices in 2010. Within six months of launch, we saw that customers were checking their account balances 10 times a month, or about twice a week. In February 2014, RBS noted in its annual results that it had more than 2.5 million active mobile users using the service an average of 28 times a month.^[19] Mobile banking enables us to manage our finances on the go, and feel more in control of our money.

In some parts of the world with little (or no) financial infrastructure, mobile banking and payments has done more than allow people to bank with ease—it has proved capable of transforming entire economies. In 2007, mobile network operator Safaricom (a Vodafone company) launched the M-PESA service in Kenya (Figure 1-9), which enabled mobile money transfers and bill payments.^[20] Pesa is Swahili for money, so the name of the service literally means “mobile money.”

An M-PESA customer receives a text message that confirms the transfer of 4,300 Kenyan shillings from his account (courtesy of Peter Gakure-Mwangi, )

Figure 1-9. An M-PESA customer receives a text message that confirms the transfer of 4,300 Kenyan shillings from his account (courtesy of Peter Gakure-Mwangi, http://www.thinkm-pesa.com/)

Let’s say you lived and worked in an urban center, and your parents lived in a rural area. In Kenya, before services like M-PESA came around, if you wanted to send money home to your family you would take your cash and hand it over to a taxi driver, or perhaps a friend who was taking the bus, and instruct him to take it to your parents’ village. Eventually (or maybe never), the bus or the taxi driver would arrive at the village and your mom or dad could pick up the cash. As you can imagine, this isn’t a very secure or efficient system.

Unfortunately, many who live in rural areas do not have a bank account, or even access to a bank, which is what you traditionally need to securely transfer money between individuals. When M-PESA introduced mobile bill pay and money transfers, its customers began using the system to send money instantly to anywhere in the country. If the recipient also had an M-PESA-enabled phone, then the money would be credited to his account, which could be used to reload his prepaid account, pay bills, or exchange for cash at an M-PESA agent or ATM. If the recipient wasn’t an M-PESA customer, he could still show the text message with the reference number of the payment at any of the 40,000 local M-PESA shops, and could receive cash. Access to the funds in an M-PESA account is protected by the user’s four-digit PIN, used to authorize any transaction.

M-PESA launched in March 2007, and has grown incredibly: by March 2013 it had 17 million users.^[21] M-PESA can be used not just for personal payments, but also for buying groceries, paying utility bills, or even paying taxi drivers. The success of M-PESA is a fine example of how the search for practicality and convenience has spurred payment systems to evolve within technological eras.

Worth

Looking back a few pages, why was it possible for those enormous rai stones on the island of Yap to ever function as a form of currency? They were way too heavy to carry around for everyday use, and you’d likely die if one fell on you. Despite being cumbersome, the rai stones gained intrinsic value within the Yap culture, due to the stones’ makeup and rarity—there are no limestone deposits on Yap—but also the immense physical effort inherent in obtaining them. They were shipped in canoes from limestone quarries in the Palau Islands 280 miles away. Even if a rai stone fell into the sea during the trek (which happened quite often), the oral agreement between the exchanging parties could still stand, as the effort involved in mining, shaping, and transporting the stone was witnessed and verified by the community at large.

At the core of a transaction, the parties involved need to believe that exchanging a currency as a form of payment will result in the desired outcome: the consumer will receive the item she purchased, and the merchant will receive income from the sale. Time has shown us that this is possible regardless of the raw substance of the currency as an artifact. What matters is perceived worth. The merchant and the customer must trust that the currency—whether it is salt, shells, stones, coins, or digital blobs—will be recognized as valuable by others within their community, and that it will not soon fall out of favor. Historically, gold was an obvious choice, given that it does not rust and is easily shaped into any form. Paper was less obvious—it isn’t beautiful or rare, but early in our history it became the de facto proxy for gold, grain, or other wealth held by the administrative entity who minted it. This was possible because paper could take on inferred value by the community that created and circulated it. Worth is the most abstract trait of a payment system, and so is most susceptible to flux due to factors like government instability, fraud, and public opinion.

Introducing Paper Money

In the year 1000 in Western China, commerce was blossoming. However, people were growing tired of juggling the currency of the day: hefty copper coins with square holes punched in them so that they could be strung together in long bands. They needed a form of currency that was easier to handle in large amounts. So, the merchant guilds experimented with paper notes they called jiao-zi or “exchange medium” as a kind of promissory note (Figure 1-10).^[22]

Jiao-zi paper notes, which were later minted by the Song Dynasty as hui-zi: the 10 circles on top represent the denomination in coins, and a market scene is depicted at the bottom, below the issuing merchant association’s stamp (image courtesy of Ministry of Culture, P.R. China)

Figure 1-10. Jiao-zi paper notes, which were later minted by the Song Dynasty as hui-zi: the 10 circles on top represent the denomination in coins, and a market scene is depicted at the bottom, below the issuing merchant association’s stamp (image courtesy of Ministry of Culture, P.R. China)

Using jiao-zi became so popular that the Song government took over the minting of the notes, which it renamed hui-zi. Each note could be exchanged for its corresponding value in copper coins. Hui-zi were block-stamped with the government seal and the denomination, as well as a warning to counterfeiters (punishment for printing fake bills was typically beheading). This happy experiment did not last, however, as the overprinting of the notes caused the value to drop drastically. Still, this practice persisted even after the Mongols had invaded the region in 1276, though they later minted and enforced their own distinct currencies. Paper was successful as a payment medium in this case because of its portability, as well as the regulation and distribution by a governing party.

Let’s Talk Turkey

Still, having money alone isn’t enough to spawn commerce. We have to get along with each other first. Parties on both sides have to speak a common language to establish a mutual trust that is then transferred onto the money being used. Aside from being basic economic “events” that are beneficial to the parties involved, what makes these exchanges so personal is that they are usually accompanied by humane gestures, even when strangers are transacting. Surely the merchants of the Song Dynasty did not all know each other personally, but there must have been a modicum of social grace that was observed before a transaction took place.

Today, most of our brick-and-mortar payments are initiated with cheerful greetings (aside from vending machine encounters). Even the largest big-box chain store is designed to exude helpfulness and approachability. At the door, we are met with a cheerful “How are you?” and asked if we “need help finding anything?” Items on the shelf are logically organized (hopefully), clearly labeled, and marked with price tags (Figure 1-11). These stimuli resonate just as deeply with users during a digital transaction.

The layout of a Target store—notice that the checkout line, restrooms, and guest services are located near the front entrance, so that they are easy to find (courtesy of Target)

Figure 1-11. The layout of a Target store—notice that the checkout line, restrooms, and guest services are located near the front entrance, so that they are easy to find (courtesy of Target)

Financial interactions at their core are a conversation between buyer and seller. Just like in a conversation with a friend, we might have expectations relevant to the context of where the transaction takes place, the end goal of the transaction, as well as familiar language patterns and behavioral cues that will ensure that we (consumer and merchant) will reach our desired goals. This back-and-forth between consumer and merchant extends back to our earliest markets, where weighing the value of goods and haggling over the best price brought about rituals of commerce, and conversation as art. For example, if you were shopping in a 13th-century Moroccan souk, a ritual of greetings and tea drinking would precede a transaction. To skip straight to haggling would have been gauche, and the merchant may have chosen not to do business with you. Your social grace and reputation as a seller (or customer) would speak just as loudly as how many coins you had in your purse. These rituals ideally established good faith and relationships between the two parties, which transferred both to the goods purchased and the form of currency changing hands.

This tenet of mutual trust has persisted throughout the evolution of payment systems. In the early 1700s, there was a shortage of small change in England. The Bank of England’s pound sterling was strong, but there weren’t many smaller notes to go around. Within the City of London’s financial hub, merchants began to write letters to their banker, authorizing the release of funds to a payee—usually in sums below £20. The merchant would give the letter, called a drawn note, to the person he intended to pay.^[23] The drawn note could be redeemed for cash at the merchant’s bank. These informal letters would mature into what we know now as the check.

A typical letter, as seen in Figure 1-12, would read like this:

Mr. A Fowler,
Pray you pay to Mr. Thomas Hill without further advice the sum of seventy pounds. —and this receipt shall be your sufficient discharge for the same—

Signed,

9 October, 1725

A drawn note, an early form of bank check, 1725—note the letter is addressed to Abraham Fowler, Goldsmith (a term for banker) on Fleet Street, London; Mr. Fowler’s bank became Goslings & Company, one of the first branches of Barclays, and the Goslings branch still stands today at 19 Fleet Street (courtesy of British Museum)

Figure 1-12. A drawn note, an early form of bank check, 1725—note the letter is addressed to Abraham Fowler, Goldsmith (a term for banker) on Fleet Street, London; Mr. Fowler’s bank became Goslings & Company, one of the first branches of Barclays, and the Goslings branch still stands today at 19 Fleet Street (courtesy of British Museum)

Of course, this was not the first financial paper trail by any means. As early as the fourth millennium BC, the Sumerians were inscribing pictographic records of sales and debts in stone tablets. A letter like this was particularly handy if one was not in possession of enough cash to pay someone at a particular moment—say if you had borrowed cash from a friend to pay for a large expense that you could not cover on your own. Initiation of this sort of transaction required an establishment of faith among the three individuals: the account holder trusts his banker will store and release his funds at his bidding, the banker trusts his account holder to keep his accounts in good standing, and the payee trusts that the account holder is good for the money.

A Numbers Game

So, what happens when there is no physical form of currency? These days, when you hear or read about a sum of money, say $100,000, what do you see in your mind? Do you picture stacks of hundred-dollar bills, or do you picture it as a number on a bank statement, or a green line item on the transaction history of an online banking site? The use of hard cash is dwindling as we shift to forms of payments like credit cards or electronic payment, where we never have to physically handle the money.

Money has become too easy to spend! With the tangibility of coins and paper bills, you are explicitly aware of how much money you are spending because you can see the money dwindle in your hands.^[24] For example, say you started the week with $100. If you buy a t-shirt that costs $12, you will likely count out the paper bills to add up to the total, perhaps two $5s and two $1s, and hand it over to the merchant. Now you have $88 left in your wallet.

If you take away the dollar bills and instead use a plastic card to pay for the t-shirt, and then use that card again several times in a day, you might be less aware of exactly how much you are spending. To properly track your purchases and take stock of your personal financial status, you must rely on another information source, like a checkbook balance or a bank statement.

Even if you do see a record of your purchases on your bank statement, what you see there may not tell you what you really want to know. Paper bank statements are dumb lists, and are not great at telling you how much of your monthly budget has gone to dining out or to utility bills. One example of this is a confusing by-product of transaction records that renders most events on your bank statement into gobbledygook. For example, on this month’s bank statement, I have the following transaction:

CHECK CRD PURCHASE 10/24 76 10098523
NAPA CA 41111111XXXXXX0590 ?MCC=5542 - $67.25

I can infer that on October 24th I used my debit card for something in Napa, California, possibly at a 76 gas station, that cost me $67.25, but not much else. That’s not very helpful. The average consumer wouldn’t be able to interpret much from this item. Since I happen to work with financial services clients, I know that MCC stands for Merchant Category Code, and that “MCC=5542” means the purchase was made at an “automated fuel dispenser.” Now I can extrapolate that jumble of numbers and letters into something more meaningful, and add in plain-language descriptors to provide more context:

October 24, 2013
Merchant: 76 Gas Station, Store No. 10098523
Location: Napa, California
Total: $67.25
Paid with: Visa Debit Card ending ...0590

That’s much easier to understand! Fortunately, a new generation of banking services is layering a more user-friendly sheen on typically dry banking interfaces. The scenario just described (giving context to transaction histories) is one of the selling points of Intuit’s Mint (Figure 1-13). Once the user links her bank account to Mint, the app will begin to translate payment histories and statements into tables that are easier to sift through. Mint pulls out known merchant IDs and categories from these histories and populates helpful graphs to illustrate spending patterns. Mint also endeavors to help its users make smart financial decisions by enabling budget planning and goal setting. Once you set up a monthly budget profile, Mint can then show you a snappy graph that gives you a clear idea of where you stand on a daily basis.

Another service in this vein is Simple Bank (Figure 1-14). Although backed by a brick-and-mortar financial institution (FDIC-insured Bancorp), it has none of the cornflower-blue corporate branding, awkward web interfaces, and confusing service agreements. Simple is a web-only bank; it does not have physical bank branches. It issues customers a plain, “simple” white Visa debit card, and any purchases made with the card are tracked by the mobile app and online dashboard, where they are fed into visualizations of spending categories and monthly budgets.

Figure 1-13. Mint.com offers rich transaction statements in plain English, as well as automatic and custom categorization (courtesy of Mint.com)

Simple Bank displays a prominent “safe-to-spend” balance that takes into account pending transactions, scheduled payments, and savings goals (courtesy of Simple.com)

Figure 1-14. Simple Bank displays a prominent “safe-to-spend” balance that takes into account pending transactions, scheduled payments, and savings goals (courtesy of Simple.com)

On the Simple mobile app, your available balance is clearly displayed at the top of the screen—but instead of showing a running balance, which you would normally see when you ask for a balance from your bank, Simple takes into any account pending transactions plus recurring monthly payments you have scheduled, as well as deducting toward any savings goals you have set for yourself. This feature is meant to help you save money by preventing you from overspending, and to keep you aware of obligations and goals.

With time-saving features like mobile check deposit (taking a picture of a check to transmit a deposit to your bank account) or bill pay with automatic paper-check-mailing services, these new-generation banking applications are enabling today’s consumers to stay on top of their spending, and putting cognitive weight back into digital money.

Stability

Payment systems thrive when they make the logistics of commerce more efficient, but also when the payment medium itself is perceived as being reliable in the eyes of those who are using it. This can be related to maintaining a consistent value over time, or being backed by an institution or by gold stores (such as paper money used to be). This sense of stability could be reinforced by the aesthetics of the payment artifact itself. These tangible and intangible factors combine to create an aura of general trustworthiness.

An example of a tangible factor could be how the payment artifact looks. Coin and bills are usually stamped with symbols from an official mint or regulating institution (Figure 1-15). Historically, this could have been images of the kings or lords whom we also trusted to protect our lands from invaders and uphold local laws. The coins just looked official (and counterfeiting was dissuaded by the consequence of death by especially unpleasant means). These images of institutional sponsorship carry over to today’s banknotes and coins, emblazoned with the floating heads of state and symbols that draw on the collective sense of national pride.

An 1865 US banknote, a $10 bill printed by a bank in Rhode Island—note the patriotic symbolism of the eagle and Benjamin Franklin; before the Federal Reserve Act of 1913, regional banks could print their own currency (courtesy of the Frost Currency Collection, John Hay Library)

Figure 1-15. An 1865 US banknote, a $10 bill printed by a bank in Rhode Island—note the patriotic symbolism of the eagle and Benjamin Franklin; before the Federal Reserve Act of 1913, regional banks could print their own currency (courtesy of the Frost Currency Collection, John Hay Library)

See Me, Touch Me, Feel Me

How a currency looks can have a huge impact on its perceived worth. Let’s face it: US paper money leaves much to be desired in terms of aesthetics, though it is one of the dominating forces of the world financial stage. For decades, our money has remained stoic in its olive-hued constancy, a gallery of grim presidential noggins staring back at you. My wife and I spent our honeymoon in Costa Rica. There, we were astounded at how truly dull our native currency is, once we got hold of Costa Rican colónes. Costa Rican bills are a pleasant mélange of golds, oranges, greens, and blues, with lifelike illustrations of local wildlife, historical leaders, and scenes of Costa Rica’s abundant natural beauty (Figure 1-16). There are transparent windows carved into them, with insets of a map of the country or national symbols. The colón is a work of art, but its beauty belies its substance.

Costa Rica was actually the first country to print its bills on polymer.^[25] The first plastic colónes were made of Tyvek sheets manufactured by DuPont. Polymer notes are not only extremely resilient, they are also hard to fake. They can be laden with all manner of magnetic security strips, RFID tags, watermarks, and micro-inks to dissuade counterfeiters. They can last 2.5 times longer than paper bills, being impervious to washing machines and the jaws of family pets.^[26] This is not your grandfather’s $2 greenback! Now there are all these vibrant, colorful currencies floating around in consumers’ pockets all over the world, and thankfully no one is carting sacks of grain around to pay his neighborhood grocer.

Figure 1-16. 20,000 Costa Rican colónes

Because the imagery on a banknote carries such immense cultural weight, it can have a profound effect on its stability as a currency. Designing interfaces for a new kind of payment app is one thing, but imagine having to build an entirely new currency—one that would be used by many nations! In 1996, the European Monetary Institute (EMI) had just that challenge. It held a design contest, and chose Austrian currency designer Robert Kalina’s concept for the new Euro bank note.^[27] EMI conducted a survey across the EU with a short list of submitted design concepts. Money handlers and consumers were shown mock bills and asked to weigh their various aspects (aesthetics, legibility, size). Kalina had chosen motifs of stately, recognizable icons of European architecture: pastoral window frames, stately bridges, and Roman aqueducts: “I came to this idea of bridges to symbolize communication among European countries, and between Europe and the rest of the world.... And open gateways and doors to symbolize the future—the idea of going through them to find a new currency.”

The losing bills were either too dull or too fanciful, shot down with comments like “looks like Monopoly play money” or “it’s too flashy and loud.”^[28] EMI found that the bill designs that seemed too playful (like the abstract entries by Robert Pfund, shown in Figure 1-17) were deemed untrustworthy, while more staid designs were “inconspicuous and cold.” Despite the saying, humans do often judge books by their covers, and so in this case if the users don’t like the way something looks, then they are less likely to interact with it.

Figure 1-17. A rejected design for the Euro by abstract artist Robert Pfund, deemed too fanciful to be a commonly accepted currency

With cash, there is a cognitive association with how the money feels in your hand, as well as how it looks. Stick your hand in your pocket, and if you have any, feel the loose change rattling around in there. Over time, you have learned the ability to instantly recognize the texture, weight, and size of, say, a quarter versus a dime. Some countries have extended this variance in tactile form to paper money as well. Again, the Euro is a great example of fostering this kind of intimacy. Each denomination has a unique size, and is marked with numbers printed in relief and foil elements to signify their value (Figure 1-18). Tactile marks along the edges make it easy for the blind to recognize them by touch, and the relative sizes are a bonus for the rest of us, like merchants who need to quickly separate the 20s from the 50s.^[29]

Figure 1-18. A table of Euro bill sizes by denomination

Cultures around the world independently began to adopt the use of coins and bills as currency, in their own time, each with its own origins, materials, and denominations. The meaning of the symbols, typography, and material the currency is made out of are all contributing factors to a trustworthy aesthetic that is evident to both merchants and consumers. This is why drastic design revamps, such as the recent redesign of US $20s, $50s, and $100s, can lead to much public discourse, especially if it might have a negative impact on the currency’s perceived worth. Let’s explore two relatively recent real-world examples that illustrate this aspect of a currency’s stability.

The Trouble with Saddam’s Dinars

Before the second Iraq War, Saddam Hussein decided to revamp all denominations of the Iraqi dinar to showcase his tyrannical might. For example, he ordered that busts of himself decorated with stately or military garb be added to each bill. Adding insult to injury, Saddam’s bills were notorious for being poor-quality prints with runny inks, and were very easily faked.

Once Saddam’s reign ended, the bills’ accepted worth dropped drastically, which of course had dire effects on the local economy. Most Iraqis used only cash, and so everyday transactions like grocery shopping became extremely difficult, as most merchants refused to take Saddam’s money...unless you happened to have an older dinar printed before Saddam’s, which back in 1991 would have been worth around $3.25 in US dollars. After the second Gulf War and the ouster of Saddam, the value of 250 dinars dropped to 16 US cents, which meant that people had to carry huge wads of bills with them when they left the house. Imagine trying to pay for your gas or your phone bill with pennies or nickels, and you’ll have an inkling of how inconvenient and worrisome this situation was for the typical Iraqi citizen. Imagine checking your bank account balance only to see its value drop drastically within the span of a few days!

In order to rectify this, in 2003 the occupying Coalition forces (and later the Iraqi Republic) worked to issue new banknotes based on pre-Saddam-era bills as an emergency measure (Figure 1-19).^[30] These bills replaced Saddam’s face with symbols of national pride such as granaries, date palms, and the Minaret of Samarra. This retro-revamp of the dinar helped to stabilize the currency so that the cycles of daily commerce could start to recover (and of course it had the side benefit of erasing the omen of Saddam’s visage).

Figure 1-19. A dinar bill during Saddam’s reign (top) and a post-war bill (bottom)

Bitcoin Further Shifts Money to the Digital Plane

Recently, new forms of completely digital currency have sprung to life in online communities. Some are meant to be purely conceptual, staying within a digital realm, as with gaming (e.g., Second Life or World of Warcraft). Others have made the leap to real-world markets, like Bitcoin and Litecoin. The ultimate abstract currency, Bitcoin, was developed by a faction of the tech community who were interested in creating a globally accepted digital alternative to centralized currencies. Purchases are made when Bitcoins are exchanged in public between peer accounts, with the intention that the community at large will self-govern and attest to the validity of transactions, all of which are listed in a public record (known as a blockchain). The intent was to create a pliant medium of currency that is free from both the bounds of the physical world and the whims of regulating institutions. In a practical way, it provides for simpler transfer of funds between parties, often anonymously. It makes situations like international wire transfers much easier, in that the user doesn’t have to pay a transfer fee (upward of 10%) or exchange it for a relevant currency. Funds are available in seconds rather than two or three business days, which is great for merchants (though, as of yet, there are just a handful of online and brick-and- mortar stores that accept them; see Figure 1-20 for one example). Like the Euro, Bitcoin has an uphill battle to prove itself as a trustworthy payment medium.

Figure 1-20. Coupa Café in Palo Alto, California, accepts Bitcoin payments (courtesy of Kashmir Hill, Forbes)

Unfortunately, without an institution regulating a currency, human nature steps up to ruin potentially good things. An online store called the Sheep Marketplace experienced a massive heist in November 2013, resulting in the theft of the equivalent of $5 million in Bitcoins.^[31] Someone was able to hack the market and sneak funds into a single Bitcoin account, while fooling other account holders into believing that their funds were still intact. This hack wasn’t the fault of the Bitcoin network per se, but rather a weakness in the security of this particular web marketplace. Where bitcoins (and any other digital currency) are challenged in this case is that there are no government agencies like the FDIC that could reclaim and redistribute the users’ compromised funds, as in the case of a robbery of a brick-and-mortar bank.

The financial world is currently abuzz with talk of Bitcoins, with respect to the disruption of payment systems. Each time Bitcoin pops up in the broadcast news cycle (in a good or bad light), there is usually a speculative rush that causes the value of one bitcoin to vacillate wildly. It jumped from $30 to $240 between March and April 2013, and ended the year at nearly $1,000.^[32] As of this writing, Bitcoin is experiencing a relatively stable trend (hovering around $600–$650), but it is still considered a gamble as a widely circulated currency. These kinds of speculative bubbles (like the 2005 mortgage bust) are lucrative but troubling—especially when the potential of huge returns blinds those who join in the investment frenzy. This rapid fluctuation, coupled with the media’s association of bitcoins with illicit black markets and money laundering means that their worth as a practical payment system is undermined...for now.

Summary

Over time, our money has mutated from precious, practical instruments of commerce to amorphous electronic data passing us by in the ether. The mechanisms we use to transact have evolved drastically, and will continue to evolve. Whether purchases are self-motivated or gifts for others, our financial instruments have become intensely personal—an extension of ourselves and our wants. We customize our debit cards with pictures of kittens or our favorite sports teams. We fawn over elite status symbols like black or platinum credit cards. We collect rare coins and bills that tell stories of our country’s history. We touch the cards and bills in our wallets every day.

Though money as an artifact means many things to many people, we all tend to gravitate to payment systems that are the most consistent, convenient, and relevant to the context in which we use them. Since most of us leave the house every day with a wallet or purse and a phone, two very personal items, it’s only natural that these worlds begin to merge. How we use these new instruments will certainly be influenced by the emotional associations and mental models we have formed over thousands of years of transacting. We as designers should endeavor to keep in mind both the personal and historical context of money when creating new commerce experiences.

Designing Mobile Payment Experiences by Skip Allums