Money is the foundation of civil society. It acts as a means of exchange and is widely ubiquitous, spanning almost all cultures and societies.

We know why fiat works - it is a trusted part of social convention and grants more efficiency gains than the crude barter system that dominated ancient societies. This shift created the robust and complex global economy we all know of today, but money’s essence largely remains up for debate.  

What is it about a piece of paper that makes it such a sticky and powerful mark of wealth? And can that insight be applied to modern digital banking products?

Cash Memory

Cash (not cache) as it stands is memoryless, but the process that humans wrap around it makes it memorable and distinct.

Think about it: you’re going to your pharmacy with a $20 bill in your pocket. You decide to spend $2 of your $20 on a pack of gum and $10 on some cough syrup. Money as it stands alone is useless but the action of using it to acquire goods is a way to track your former actions.

Context-dependent memory may also add some color to this argument. Memory is dependent on the incidental environmental factors in which events occur, causing certain situations to heighten a memory more than others. If we think about that in context with money, the act of opening a wallet, using a bill to pay for your pack of gum, and walking away with a sense of achievement acts as a robust mechanism to track and trace our past actions as consumers of physical goods. These mental gymnastics are intimate and formalized acts that differs from person to person.

A Paradigm Shift to Digital Economies

Surely the essence of money has to do with a lot of things, but making spending experiences memorable is largely significant. As the world moves past cash-based economies and into the digital era, we’ve seen an explosion of funding, specifically around $34.5B as of 2019, in the  financial technology and payments landscape.

There’s a rapid interest to digitize use cases (think of companies like Robinhood, Acorns, Lemonade, Wealthfront, etc) and move away from the traditional reliance on centralized institutions. These fintechs function through mobile and desktop applications, placing control in the hands of its users and away from the monolith.

While the intent to build out these experiences is genuine, there are several issues stacked up against customers feeling the same cash memory connection to newer technology. Jessica Exton from ING’s consumer economic group says that many people are now “using multiple devices to manage their money on the go...Yet, while a large majority agree that the latest financial technology should be available to them, when it comes to newer digital ways of managing money, we see some reluctance around adoption. Concerns about security, privacy, and maintaining control of finances appear to be key barriers.”

And so, despite the slew of innovation at the retail product level, it’s not surprising that only 1 in 10 people have switched to digital financial experiences. This inherently makes sense - it’s easy to feel safe and in control of your finances when you’re dealing with the micro ecosystem of your own wallet.

For users to feel long-term confidence in digital macro ecosystems, capturing the intimacy and track and trace nature of a payments experience, thereby creating individualized and incidental cash memory is critical.

Digital Cash Memory

Successful digital fintechs retain the concept of cash memory with features that mock the ‘sticky’ components of physical money, placing the customer at the core of their experiences. This means each unique pattern of spending, budgeting, and saving is ballooned as insights into the user’s financial experience.

9 out of 10 people value personalization and simply broadening the scope of financial products or expanding interest vehicles does not make the experience of spending money as personal as people like it to be.

There’s a reason why cash economies are so popular, and it’s not just driven by socially constructed trust. The appeal for incidental context specific recall drives customers to call on routines and visualize their personal wealth, returning to digital experiences that they love and feel connected to again and again.

Qualities of Successful Fintechs

These flexible, custom solutions master the consumer framework and psychology of spending money. Customers don’t just want banks to manage their wealth - they want to be empowered with awareness to make better decisions.

The possibilities are endless when building for user-centric banking - insight driven credit card rewards are a great example. Credit rewards have barely changed since the 90s, typically centering on offering rewards to hotels and airlines. Several companies are working to build tools to help users uncover insights about their behaviors and receive a relevant collection of relevant options to spend on. Customized rewards are highly coveted, given that the product is working in favor of the consumer. Other features like wealth management insights, contextualized notifications, and spending alerts are all great additional ways to provoke memory inducing spending habits and build security and trust with customers.

These specific and highly nuanced differentiators define the fintech successes. Other factors definitely contribute, but embracing the cash memory framework and building digital products around it in the present is key to building a fintech that wins both the hearts and minds of consumers - you heard it here first.