Is it a Bad Idea to Make Finances Fun?

Recent scandals involving pro athletes and gambling have led to discussions around the proliferation of gambling apps and the influence of betting on our society.

In his Fintech Takes Newsletter, my friend Alex Johnson wrote, “the resurgence of gambling in our culture has already had devastating consequences on the lives and balance sheets of American consumers and their families.”

I think his argument is sound, and I think that it is easy to see that gambling may be having a corrosive effect elsewhere in our society. Will anyone watch sports if they think the players are more interested in winning bets than in playing the game?

Alex suggests institutions make saving money more fun. He mentions successes like prize-linked savings and positive messaging writing, it “might seem like a small thing, but this stuff matters. It’s the same reason why Robinhood used to celebrate customers’ trades with virtual confetti.”

But there is a dark side to fun finances.

Robinhood’s confetti is cited as an example of a practice that can actually lead customers to make bad choices in a report entitled “Hooked and Hustled: The Predatory Allure of Gamblified Finance.” This important paper outlines the risks that come with introducing game-like features to accounts.

“Gamblification blurs the line between investing and gambling, transforming financial Decision-making into a high-stakes game that exploits cognitive biases and behavioral vulnerabilities. What was once seen as an exciting and democratizing force in finance increasingly reveals itself as a sophisticated form of predatory finance,” the authors write.

The paper delves into how people can be manipulated by influencers, trends, and behavioral tools into making bad financial decisions. For example, it notes that even things like lottery jackpots can influence people’s financial decisions.

“Recent U.S. data from [trading apps] and national lottery systems demonstrate a negative correlation between lottery jackpot size and retail trading activity. Specifically, larger lottery jackpots correlate with a measurable decline in retail trading, suggesting that heightened lottery participation diverts investors’ attention from financial market engagement.”

The paper also points out that there is an asymmetry in power between individual users and corporations that starts from the point of account opening.

“Yet, users normally do not read disclosures, and many scholars have argued that not reading such terms is actually rational, as whether one reads or not does not really change anything.”

Anyone looking to use a gamified structure for their accounts should read this study and think about whether their design could lead “users into decisions that they might not otherwise make if they were fully informed and exercising genuine free will,” as the authors write.

While I am not completely opposed to the use of these tools, I think they should be deployed with caution and full awareness of the risks.

Maybe instead of focusing on how to make saving more fun, we should focus on how to make it worthwhile. Why would anyone put money in an account only to watch its real value decline? Maybe instead of building a savings game, we need accounts with interest rates higher than inflation rates.

Years ago, I saw a Twitter post that essentially said the growth of things like gambling, meme stocks, and NFTs reflects a societal belief that hard work and saving don’t work anymore. The result is that people, particularly those in younger generations and those who are on the lower rungs of the socioeconomic ladder, feel like only luck and get-rich-quick schemes will improve their position.

The authors of Hooked and Hustled note this, writing the “prevalence of millennial investors on r/WallStreetBets, correlates with their generation’s experience of lagging wealth creation, potentially contributing to their gambling-like, risk-taking behavior and nihilistic approach to financial decisions.”
​
Traditional financial institutions can’t lament the loss of their customers if those same institutions stack the deck against them. 

Ben Jackson is the Chief Operating Officer of the Innovative Payments Association, a leading trade association representing companies in payments. With over two decades of industry experience, Ben is dedicated to providing valuable information, advocacy, and support to help members improve financial outcomes for consumers, businesses, and government agencies.