Leutz: The Victims of Venmo

The rise of digital currency threatens financial awareness.

by Peter Leutz | 1/3/19 2:10am

Over winterim, I was Christmas shopping on Michigan Avenue, nicknamed the magnificent mile, in the heart of downtown Chicago. Nothing out of the ordinary, as I grew up a 20-minute train ride from the city. After making my final stop at stores requested by my mom and sister, I was approached by a homeless man asking for a few extra bucks. I pulled out my wallet, noticed it was empty, and then in one of the more ridiculous moments of my life I asked if he had Venmo. I asked if a homeless man had Venmo. I then realized I hadn’t used or seen cash in weeks. I couldn’t imagine a situation when I would absolutely need it, unless I found myself in the unique predicament into which I had just stumbled.

This absence of paper money in my life is far from unique to me. In fact, 92 percent of global currency is digital. On the global scale, this is a positive statistic. Digitized currency modernizes our economy, breaking down barriers of commerce in a new and highly efficient way. We can now send and receive payments around the world in real time. Giving us access to sectors of the economy from which we were previously detached. This allows for more transactions to happen, and the economy, as a whole, benefits. However, on an individual level there are consequences to consumers, who can now spend large sums of money not just with the swipe of a card, but with the tap of a finger.

Having experienced my first extended period away from home this past fall, I was astounded by how much money I spent. I didn’t recall spending much money on anything. This is likely because a very small percentage of my expenditures were done with cash. In this way, it didn’t feel like I was spending any money, leading to my shock upon checking my bank account at the end of November. I don’t intend to assert that the spending habits of students at Dartmouth provide an accurate depiction of average global consumer. However, mobile payments are becoming more and more popular at an exponential rate. Sweden is leading the charge with only 15 percent of all transactions involving cash. Economists predict that some developed countries like Sweden could be cashless by 2020. However, underdeveloped nations like Somaliland are not far behind. The impending irrelevance of physical currency is not only hurting the homeless man I met on the street, because idiots like me no longer feel the need to carry cash and therefore are not lying when they say they “don’t have any.” However, the problem extends far beyond donations to the homeless.

The phenomena of mobile payment options inducing the consumer to spend more, as I experienced this fall, is rooted in concrete psychological studies. In fact, Ross Steinman, a professor of psychology at Widener University expects mobile consumers to spend anywhere from 12 to 18 percent more. Consumers are more likely to have a kind of personal attachment to the paper money they spend. On the contrary, there is a proven disassociation between the consumer and electronic forms of currency. Thus, they may spend more recklessly with digital currency, as if it were monopoly money.

A big chunk of my spending during the fall term was from purchases on Amazon. For college students, Amazon offers a discount rate for a Prime membership. This is a wildly popular deal, allowing college students across America to buy books, dorm décor and last-minute Halloween costumes within a matter of days. Once one’s Prime account is set up, orders can be placed with one click. With just one click, I can make almost anything on Amazon’s digital marketplace appear at Hinman in two days. It feels more like magic than shopping.

The second culprit in the murder of my bank account fall term was Venmo, an app that links to any bank account allowing seamless transferring of money between two parties. Whenever one of my friends bought something, and I needed to reimburse them, I used Venmo. I simply typed in their account name, which is linked to the contacts on my phone, typed in the amount, left a clever caption regarding the payment, and, boom, transaction complete. Venmo is so accessible it is almost fun. The money I was sending didn’t feel real. It was like any other game on the app store. I could bleed out 30 bucks from my bank account just as easily as I could turn left in Temple Run.

Spending money in the digital era feels more like waving a magic wand, or playing a video game, than making monetary decisions. In this way, there is a growing feeling of numbness, or detachment, between the consumer and digital currency. When people can’t physically see money leaving their hands, they are at a higher risk to spend recklessly. Modern consumers are in danger of being desensitized to their own expenditures. This is a frightening reality as it could lead to an over extension of wealth. Credit card debt plagues families across America and could claim more victims when all purchases can be made with “one click,” whether it’s with Apple Pay, Venmo or “contactless” credit cards: merely hold your credit card up to the reader, and your payment is made. The new invention bears an appropriate name, given that the American consumer is just that: out of contact. Our digital economy is producing consumers who are out of contact with their own financial accounts. This reality should worry us.

Violent video games don’t make kids more violent, but they may desensitize them to the presence of violence in the real world. An increasingly digital economy may not directly create a more reckless consumer. However, consumers are being desensitized to the value of money that they are spending electronically. As a global community of consumers we have become more connected; however, on an individual basis, we are less self-aware.