This blog was co-authored by Eddie Chin and Phillip Jackson.
Last April, when lockdown orders were just a few weeks old and people were cleaning their consumer goods with disinfection wipes, we began to notice a few trends emerge and merge, resulting in consumers becoming retailers.
First, lockdown prompted people to take up activities they’ve always meant to do or learn as the typical distractions -- commuting, dining out, going to sporting events, driving the kids to soccer practice -- suddenly ended. Sales of home fitness, craft kits, knitting supplies and cooking gear shot up.
Second, for many people, lockdown was a time for taking a critical look at the stuff we’ve accumulated. How much of it did we really need? Can we sell some of it to make space in our lives and earn a few bucks in the process? It’s a phenomenon I wrote about in my byline, We’re All Retailers Now.
I jumped on the opportunity, clearing out excess fitness equipment from my garage and music gear from my home studio, earning $4,200 in 24 transactions across eBay, Facebook Marketplace, and Reverb.
Why am I bringing up what feels like ancient history now? I’ve been thinking about digital wallets of late, and how they affect our relationship with money. We’re not just retailers now, to some extent every person is effectively a corporation. Let me explain.
When financial vehicles are few, it’s easier to see the big picture of our spending and financial health. In my parent’s day, groceries, clothes and household items were paid for by check, gas by the charge card for the local gas station, and credit cards were for emergencies only. Life savings were kept in stocks and bonds, managed by a stockbroker who they visited every other year, as well as money stored in a high-yield savings account at their local bank.
One generation later, spending in my household is spread across multiple digital wallets, PayPal, Venmo, Apple Pay, Amazon Pay, checking accounts, and credit cards. More importantly, how we opt to pay for something is driven by the benefits of paying that way. I know a couple who use a credit card to pay the mortgage on their New York City apartment because of the card’s cash-back rewards program.
And there’s a freelancer who asks just one of her clients to pay her via PayPal, and she reserves that money for online shopping (it’s how she sets limits on her online spending).
In China, the Pinduoduo platform has become hugely popular thanks to its “team purchase” model, which allows users to share product information from the platform on social networks to build a shopping team for that item. Once a team is in place, they’re eligible for a volume discount. How long before a similar platform is available here?
All of this means that as individuals, we’re no longer merely shoppers; we’re purchasing agents who see the acquisition of goods as a strategy that, done correctly, helps us improve liquidity as well as our overall financial health.
What’s more, the breadth of options for payments is rivaled only by our options for building personal wealth. We have all the same options as our parents (high-yield savings accounts, CDs, stocks, bonds, mutual funds, money markets), along with a plethora of vehicles spawned by the internet, including crypto currencies, interest-bearing digital wallets, commission-free investments platforms that allow consumers to purchase fractions of stocks and exchange traded funds (ETFs).
For my Manhattan friends, savings stems from their credit card as well as their salaries. As Venmo explains on its website, consumers can use payback from a coffee run to buy bitcoin or some other crypto. I can acquire stocks by inviting friends to join Robinhood or get $40 worth of crypto by opening a Celsius Network account (which pays decent interest rates on any crypto I may buy and save through the network).
Not only are we veritable purchasing agents, we’re also CFOs who must manage our balance sheets with an eye for optimizing margins. This really has a profound impact on how we manage financial decisions. My parents would have been gob-smacked if I had suggested to them, in the 1980’s, that they paid their mortgage with their American Express card. Today it makes a lot of sense.
The Challenge of Repatriation
It’s all well and good to buy your officemates coffee via Apple Pay, get paid back via Venmo, and use those funds to buy crypto, but what happens if your car’s transmission conks out or some other unexpected emergency crops up? The cost of moving funds between digital wallets or to your checking account isn’t small. Venmo charges 2.5% to move your money to a bank.
That’s assuming you can get your money out of a platform. Over 50% of American kids play with Roblox, which means they have real money tied up in the platform that can never be repatriated to their piggy banks.
If you thought repatriation of funds was the sole problem of corporations like Apple, think again. Repatriation, or getting our money out of a digital sphere so it can be used for another purpose, is a problem we all face now that we’re also digital corporations.
It also means that my 9-year-old needs to obtain an astute level of financial literacy, like whether it’s worth investing her birthday money in Roblox if she’s likely to get bored with the platform once lockdown ends and she can play with her friends again.
She’s only nine, yet she too must think like a digital corporation. As a dad I find that pretty mind-boggling, but it’s also an inevitable outcome of digital money. This kind of financial literacy will shape the next generation’s behavior, and ultimately the tools that will give them visibility and unified access to it all.