What looks like fraud, looks like fraud, but isn’t it? What about a business website that pops up when you search for the government agency that issues driver’s licenses and charges a nice fee for transmitting your details to the real website?
Personal finance activists have been complaining about these sites for years, but I think there is a bigger lesson to be learned about how we spend our money these days. Between outright fraud and honest trading there may be a clear legal line – but economically and psychologically the distinction is a gradual blur.
I’m afraid we are now living in this haze, spending money without clearly perceiving what happened. The pandemic, with its shift to contactless or online spending, has served to further catalyze the process.
Consider the website adjacent to the scam: the main service it provides is to solve a problem that it paid to create – namely that the official website is not as prominent in web searches as it does. could be.
The almost worthless service, however, is described unambiguously and the website makes it clear that this is not an official site. So who would knowingly use such a service? My wife did this recently. And it goes without saying that my wife is a person of the most refined wisdom and discernment. So how did this calamity come about?
My wife handed over around £ 100 for nothing of value because her technology made it so easy. She didn’t notice the warning because she was distracted and multitasking. She applied via a cell phone, her browser preloaded with her credit card details. On such a small screen, signs of trouble go unnoticed. We are cautioned to be careful with the fine print, but on a cell phone all print is in the fine print.
This is why I argue that these websites exist on a continuum. There is the outright fraudster who tries to freak you out by sending you thousands of pounds to avoid ruin or jail. Then there’s a top-notch site like Amazon, which no doubt provides a real service, but would love to facilitate impulse spending from customers.
Amazon obtained an absurd patent on the “one-click” online retail ordering in 1999. (Steve Jobs, with typical foresight, immediately licensed it to Apple for a million dollars.) This patent now has expired, but Amazon is still keen to do so. spend effortlessly. Every time I use my phone to check my book’s sales rank on the Amazon website – about every 27 minutes – Amazon prompts me to download its app. I have no doubt the app would work better, which is why I don’t want it.
In their book Nudge, Richard Thaler and Cass Sunstein urge regulators and businesses to “make it easy” for people to do the right things – like paying taxes, registering as an organ donor, or saving for retirement. As Thaler and Sunstein are well aware, nudges can also be used to “facilitate” other things as well, such as sending money to a nearly worthless license application service.
The logical extreme is the infinitely renewable subscription. Along with the familiar bills for utilities, internet, cell phone, and mortgage, our household subscriptions include such diverse services as an online yoga resource, access to all Star Wars and Marvel movies, a Patreon campaign, wine, Amazon Prime, Microsoft Office, Adobe Photoshop, apps for mindfulness, language learning and productivity, two cloud storage services, unlimited access to BoardgameArena and a music bot on Discord.
Some of these elements will be incomprehensible, I’m sure; Fifteen years ago, that would have been not only incomprehensible, but unimaginable. Yet not only do we pay for it all, we pay without having a clear idea of when and how much to pay, or even what payment method we use.
In a classic 2006 article, Paying Not To Go To The Gym, economists Stefano DellaVigna and Ulrike Malmendier compared consumers paying for a health club membership in three different ways: with a 10-visit pass, on an annual subscription and with automatic renewal. Monthly subscription.
Monthly consumers had more flexibility – and paid for the privilege – but they weren’t using it. Instead, they stayed subscribers longer, paid almost double per gym visit, and typically took over two months to cancel after their last gym appearance. All of these online memberships connect to something health club owners have known all along.
So what should we do? On the FT Money Clinic podcast, I recently advised a listener who felt guilty about impulsively spending online and often regretted and returned purchases. One suggestion I had for her was that instead of buying immediately, she should instead write each item on a spreadsheet, to be reviewed at the end of the month. She would have time to think it over, and she would also see the cumulative price of all her temptations.
I thought that by making spending harder, slower, and more visible, she could gain some degree of control. It wasn’t until after the fact that I realized how much this advice swam against trade. Harder, slower, more visible? Businesses have long wanted spending to be quick, easy, and hardly worth thinking about. Thanks to the miracles of modern technology, they are closer than ever to achieving their desires. – Copyright The Financial Times Limited 2021