How monetary friction may actually create a superior user experience

The business of what I would call “customer security deposits” could potentially be a model worth leveraging to improve the user experience in both the physical and digital realm. Thing is, almost no one currently has such a model implemented. And there is no real software that does this yet either. It’s a topic I’ve pondered now for around five years or so. This blog is therefore my first open review of this concept.  

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Real World Examples & Overview

Here’s an existing real-world example of what I termed “customer security deposits”. I used to shop quite religiously at my local Aldi. For those unaware, Aldi is a popular low-cost grocery alternative to more mainstream brands. To even get a shopping cart at Aldi, you need to insert a quarter into the shopping cart, thereby releasing it from the row of chained-together carts. You get your quarter back when you return the cart to the corral. Sounds simple enough. They do this so they don’t have to hire someone to walk out and collect carts, either from a corral in the parking lot, or just stray carts that people leave by their car. By comparison, there’s no shortage of stray shopping carts rolling around in the wind at my local Giant or Wegmans (the tumble weed of central Pennsylvania).

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Here's what strikes me about this. It only costs me a temporary $0.25 to pull a cart out from the corral at Aldi. If I was (and am most certainly not) one of your low-life central Pennsylvanians and was told that the punishment for leaving my cart in the parking lot was $0.25, I probably would. It’s not nearly significant enough of an amount to actual make me want to put the cart back. But, for reasons related to human phycology, we take the cart back at Aldi every time.

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It’s not because we view the $0.25 through the lens of a “fine”, but rather, it’s because, well, that’s my $0.25 dammit, and I ain’t donating it to Aldi for nothing!

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Plus, getting that quarter back after returning the cart also feels good. It feels like I earned something back in exchange for my good behavior. That’s important. I’m not trying to gamify this, but our natural response here plays an important role given where I’m about to steer this blog. This is also what differentiates how Aldi deals with “customer security deposits” vs how rental car companies or property management companies deal with security deposits. The latter scenarios are typically too drawn out for the user to really see that money get deposited and come back in a meaningful way. That being said, they do work as intended quite well in holding customers accountable.

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It would seem then, at a high level, the action of placing your own money up as a security deposit of sorts (or monetary collateral if you will, not a real term, I know) appears to warrant an exponentially better user experience for all involved. In Aldi’s case, it’s a parking lot that’s devoid of any stray shopping carts, and one less employee they need to hire.

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So, where I am going with this? I think what Aldi has been doing for decades might be a source for cultivating a better user experience both in other physical applications, but also in digital ones.

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Customer Security Deposits in the Digital Realm

The concept of “customer security deposits” has stuck with me for a while. But a recent Lex Friedman podcast where he interviewed Michael Saylor is what really got me thinking about the application. In a nutshell, Michael presented the idea of giving twitter users the option to post a small security deposit to verify themselves on Twitter as simply being a real person (and not a bot). Break Twitter’s TOS, and they’ll take a portion or all of your posted security deposit. This would deter someone from trying to spin up a bot army as the cost to do so would be ridiculously high. By introducing a small amount of monetary friction, you keep everyone honest. Michael, of course, believes Bitcoin paired with the lightning network would be a suitable tool for this job (and I don’t disagree with that either, nor does Twitter’s founder, Jack).  But regardless of people’s thoughts on Bitcoin, the technical concept presented here was of far greater interest to me than BTC. And from a tech perspective, we’re not far off at all from being able to do this pseudonymously with US dollars too via a browser wallet.

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This idea was extended beyond twitter to encompass things like web traffic / visiting someone’s website. By using this system, you could theoretically prevent a network from being DDoS’s to death by making the cost to do so insurmountably high.  Already, I have dozens of use cases that I can see this being useful for. For example, rather than rely on the current ReCAPTCHA system we have, we could ditch that system of proving we’re a human (and picking all the squares that have traffic lights) and simply use small security deposits to seamlessly move about. This would warrant a faster user experience for the end user, while also giving the provider metrics that filter out any bad actors from the system by default.  

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A more pressing example is A.I. generated content. Programs like GPT-3 and DALL-E-2 are capable some insanely convincing text and image-based content that is indistinguishable from actual human generated content.  If social media wants to survive, it may need to find a way to verify what users are publishing genuine content, and which ones aren’t (even if they are human). This isn’t to say I’m against artificial content, rather, there may be lots of regions of the internet that prioritize human content and need a way to filter out people spamming their network with artificial content.

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Customer Security Deposits in the Real World

A more extreme version of this concept would be something like… what if we needed around $25 or so of monetary collateral on hand to visit a real property like my local cafe? If the $25 is essentially just a baseline, and thus we only stand to lose it though bad behavior, would the overall user experience in everything from retail stores to restaurants see a markedly improved customer experience? If there’s one take-away from Aldi, it’s that the actual deposited amount can actually be far lower than we think it should otherwise be in order to create a good incentive. So maybe it doesn’t have to be as high as $25, but you get the point.

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To take this even further, maybe there’s a small reward system, wherein, if your collateral gets returned in full, you earn a small little bonus (say $0.01 - $0.05 or so) for simply visiting for a certain length of time. Business could therefore implement small incentives for visiting their brick and mortar or digital stores.

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The User Experience Side

It’s also worth pointing out the difference quickly between something you pay to use vs something you put up as collateral in order to use. In a pay to use scenario, you view your $25 charge as a guaranteed loss. But when executed as collateral, the $25 is now seen as something you can lose. The latter would appear to reinforce better behavior, while the former does not. In other words, if you create a scenario where everyone’s got something to lose, people act rationally and are more likely to try and protect themselves against potential loss.  It’s that specific scenario which I’m ultimately attempting to recreate with software here in a way that feels rewarding.

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I should also make it clear that any authority behind this technology stops at the individual business owner level. The last thing I care to introduce into the world is a way for big tech to regulate movement (although maybe that’s why Bitcoin makes some sense here as the underlying collateral vs USD).  

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Conclusion

Off the top of my head, I’m not sure there are enough physical use cases to warrant an in-person version of the software. It would certainly require some form of hardware or POS system I imagine at the very least. That being said, a few places which come to mind are museums, bars, cafes, hotels (which some already have), etc. It acts as both a preventative measure and a dynamic insurance policy of sorts.

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I’m still uncertain, without testing this application thoroughly, whether the customer security deposit concept would legitimately improve the user experience in most scenarios. However, I do think existing systems that leverage this (unintentionally or otherwise) do point towards some form of increased efficiency, order, and more honest behavior. Once the technical hurdle of implanting this gets cheap enough to run, I’ll most certainly be the first one in line to give it shot.