Apps are the ‘new’ money

Quite a few times in recent weeks I have gone down to get a coffee from Cafe Nero near my client’s office and have realised that I have left my purse on my desk. My first instinct has always been to go up and get my purse. This is the part of the brain shaped by the continuous education and awareness that you need paper money or a credit / debit card to buy something. But in all these instances I have not acted on my first instinct. Instead I have stopped, calmly walked into the outlet and joined the queue. Why? This is due to the sudden realisation that I have got the Cafe Nero app installed on my phone, which allows me to pay and collect stamps digitally. This is new knowledge, awareness and consciousness my brain has acquired in the recent few months on how to buy a coffee.

The currency that we use to buy things have seen a significant change in the recent years. This is not a London or British stereotype, but anyone can put a reasonable bet that 6 out of 10 people stopped randomly on the streets and asked the question would say “No I don’t have any money in my purse mate”.

Yoyo Wallet recently raised £12 million in a latest round of funding. The concept is that of a unique QR code that is generated for every transaction (which is exactly the same principle in my Cafe Nero app), and loyalty points that are accumulated each time.

Paper money is slowly getting into a zone that is gradually becomes invisible. It is interesting to analyse how our interaction and experience with money has progressed through different materials: Paper → Plastic → Digital (can be seen but cannot be felt).

This transformative change in how we access and use money has also led to a loss of control on how we manage it. You can physically see how much change you got back after buying something with a £20 note. You cannot (or not almost instantly) check how much your dues went up when you buy the same thing using plastic (but it rings at the back of your mind). At a third level, when you buy the same thing using its own app (with your virtual credit card linked) you move further away from the consciousness of how much you spent or raked up a due. For example, if I am buying my coffee through physical cash, I check if I can pay the price of a regular latte using the change lying in my purse. When I am paying with the app, I don’t even bother looking at the price.

Apps originally started as a digital encapsulation of a website that you can operate and interact with on your smartphones, without having the need to manage cumbersome websites on your phone’s small screen. They rapidly transformed themselves into full fledged self sustained shopfronts. They have gradually grown into becoming gateways for exploration and also acting as our day-to-day shopping assistants.

Why do they have the potential of becoming ‘new’ money? Let’s not be mistaken that apps cannot replace physical money till the time it is managed and printed by a country’s central bank. Apps, if not already, are going to become the chosen currency for transferring the value of a transaction. The Barclays Bank app in the UK allows you to make formal banking transactions from your bank account using iPhone’s Siri. The Moneybox app allows you to invest in different funds by transferring money from your bank account.

We need to take a short pause and consider the impact here. An app can now act as currency (my coffee example), a platform to transfer currency (Barclays), a mode to transfer currency into a different form of financial instrument (Moneybox) and as a gateway for any form of transaction.

One of the biggest advantages (at that time) of physical money was the ability to see the value of a good or product with your own eyes and also hold with your own hands. As human beings back then, we used to believe in our olfactory senses and our sense of touch more strongly than now. We gradually lost this need when plastic money was discovered. Currently, we don’t like handling too much physical currency and we have problems managing too many plastic cards in our purses. But we do not mind having multiple apps in our smartphones that allow us to buy different things and also open up portals for buying ‘more’ things.

The easier something makes it for us to spend money, the more we will adopt that medium. The same is not true the other way around. We still haven’t heard the news that apps will be responsible for driving billions in consumer savings. It is already driving billions in consumer spending.

The fact that we have increasingly started using apps to complete a consumer decision journey is not a one-way development. Apps now act as and manage payment gateways. An app is money disguised as convenience. It is a form of money that never runs out, never needs to be withdrawn from an ATM machine and is always available for continuous and uninterrupted use.

When Instagram launched the Shop Now button in 2015, it was considered to be a game changer for social commerce. It is also an example of how an app can start and end the process of currency exchange in a transaction. In 2015 (seems like ages ago), banking transactions via apps jumped by 54% (YOY) and reached a value of £347 million.

Starbucks boosted the technological capability and functionality of its pioneering loyalty and payment app in 2016, admitting that close to half of its transactions would be done via phones:

The article below is a handy guide on how mobile wallets have transformed the way we manage and interact with physical money (cash):

One of the simple rules of how we interact with money is that we will treat anything that allows us to accumulate or spend money as money itself. The medium is everything, and its format is not. The idea that apps are the new currency is based on the premise that we are increasingly using apps to complete a transaction, and in essence it is the medium.

There is a dichotomy in human behaviour and attitude towards money. We still attach a numerical value to prosperity. Higher the numerical value, the more prosperous we think we are. We don’t attach a ‘value notion’ to prosperity. This is twisting the concept of money from ‘what it can buy’ to ‘what it can safeguard, protect and help flourish’. Apps as the new money is the definition of what ‘money can buy’ in action. On the other hand, when we do not treat apps as means of buying something, we are also increasingly using them to manage our money (which is the concept of safeguarding, protecting and helping to flourish).

Apps have long elevated themselves from being platforms for money transactions to being money themselves. According to this article in Fast Company, the scenario of transactions being done via phones does bring with it significant risks. When the definition of money changes, how it is misused also changes. A pickpocket picks your purse and gets access to cash and some cards (most of the time useless without the PIN). A pickpocket steals your smartphone and gets access to your apps — the new money with multiple links, all seamless, and all of which can be spent / transferred / hoarded through some taps and clicks.

Probably I should buy my coffee from Cafe Nero using loose change from tomorrow and never ever forget my purse on my desk.

Strategy Consultant