"The guy who invented poker was bright, but the guy who invented the chip was a genius." (Julius 'Big Julie' Weintraub)
The old saying that 'cash burns a hole in your pocket' needs updating, because cash is actually the thing we are least likely to spend. A study from 2001 called 'Always leave home without it' substantiated an idea that had been fomenting since the 1970s – that credit cards encourage spending. The study, involving actual transactions of value, showed that the 'willingness-to-pay' is increased when people use credit cards – and, in certain contexts, they are willing to pay more, in some cases up to 100% more, for the same goods. It's not dependent on liquidity either: the effect is the same whether or not you have the money.
This has been followed by various supporting studies that suggest the more abstract and frictionless the payment system, and thus the further removed the purchase is from actually handing over money, the higher the propensity to buy and the more we are willing to spend. Indeed, using credit changes how we even evaluate products. A 2011 study from the Journal of Consumer Research suggests that when using credit cards, a shopper tends to weigh the product benefits more highly, whereas cash shoppers weigh cost more highly.
This is why casinos use chips in place of money. A simple substitution makes everything more abstract until you cash out. It's part of what lies behind Amazon's evolution from book shop to impulse purchase omnistore. The combination of Amazon's 1-Click Ordering and the 'free' shipping you get when you pay for Amazon Prime is very potent at removing friction. The Twitter 'Buy now' button may prove to be similar.
Imagine when everything is NFC enabled. I used Apple Pay for the first time recently in the famously expensive grocery store Whole Foods. It felt great. The first time using a new technology feels like time travel; I relish that moment before habituation renders things commonplace. It also didn't feel like anything to do with money. No wallet, no cards, ever further from spending actual hard-earned cash on locally grown ethically farmed kale.
This 'increased propensity to buy' and willingness to pay more is clearly a boon for brands. If I were a retailer, I'd be adopting Apple Pay as soon as possible. I have doubts that consumers will be convinced to adopt retailer specific mobile payments, although Starbucks has done a great job in advance of Apple Pay. The great promise of mobile commerce, in some ways, is combining the impulse purchase of retail with the stored credit card one-click purchase of online. It's an area in which we'll see tremendous growth, as posters become Apple Pay-enabled. Conversely, services that help you reintroduce friction will have value for cost-conscious consumers. Imagine having a current balance displayed on screen before you buy, to remind you of the pain of paying.
This sleight-of-hand substitution works with other ideas as well as consumer spending money. Consider the idea of attention. It's the foundational idea of advertising, at the top of the AIDA funnel. The media industrial complex aggregates it and sells it to advertisers and their agencies. In order to buy and sell it, we convert a complex, analogue aspect of consciousness into a binary number called impressions. So far so good, but from all that research we now know what happens when you switch something for an abstract representation of it. The idea of impressions is getting further and further removed from the thing it represents. More than five trillion (yes, trillion) digital advertising impressions are served every year in the US alone. More and more impressions are being served, but there isn't any more attention available.
A study by the San Diego Supercomputer Center (SDSC) at the University of California says that by 2015, the sum of media asked for and delivered to consumers on mobile devices and to their homes would take more than 15 hours a day to see or hear. We can't even consume the media we are currently being served. As they point out, 'media delivered is not a measure of attention', which undermines the nature of impressions as a currency.
We are cutting the attention pie into infinitesimal slices, even ignoring the impressions being served to bots, and the industry accepts it because impressions are both concrete and more abstract than the human attention they represent. Bigger numbers are better at the top of the funnel, right? The guy who invented advertising was bright, but the guy who invented impressions was a genius.
(Any idea who it was? Answers on a tweet to @Faris. Winner wins a copy of my book.)