Today, Facebook unveiled plans to create an alternative financial system based on a new cryptocurrency, or digital token, called Libra. At surface value, Libra will be a new global currency that will be used for payments. But the Libra also could serve as a Trojan Horse, delivering a powerful new strategic tool to shape consumer behavior at scale .
Program The Incentives, Program The Behavior
Video game designers have spent years working to motivate and reward specific consumer behaviors with a rich range of in-game transactions—all fueled by virtual currency. They’ve learned how to use their game’s currency to drive engagement and revenue, no matter how good a player is or where they are in the game. They have learned how to keep players “in the game” and to drive habit. They have even learned how to use virtual currency to spur adoption and build communities. Essentially, they’ve leveraged newly created economies to shape consumer behavior.
Now, digital tokens like Libra could make it possible for a broad range of organizations to shape consumer behavior in a similar way—except this time, the currency will break free from the game. As in a game, digital tokens could be very finely calibrated to reward new levels of engagement and action, giving brands a way to tug more deeply at our psychology than ever before. But the Libra is envisioned to be far more portable and liquid than virtual currency in a game, which would make it more useful, and thus valuable, to consumers. Digital tokens also make the movement of money programmable. With Libra, developers can embed rules and conditions into the flow of the currency with a new programming language called “Move”.
Fine-Tuned Calibration—And Impact
Digital tokens have three key attributes that work in concert to deliver this new, powerful incentive mechanism:
- High reward relevance. Businesses have historically been limited in the kind of rewards they could offer consumers, with many resorting to loyalty point or service credits. As this space evolves, consumers will have the flexibility to use tokens they have earned to buy an increasingly broad range of goods and services. Tokens could potentially be portable between applications and even platforms. Consumers could even convert them to cash they can hold in their hands, if available in a growing number of exchanges focused on this purpose. This means they can tailor their reward to their needs and desires.
- More precise targeting. Tokens are not only highly divisible, but also can be easily targeted to micro-behaviors. Rewards can be focused on driving small, discrete tasks, or even used to influence the shaping of broader behavior by continually rewarding very small actions. (First introduced by behavioral psychologist B.F. Skinner, shaping is the process of reinforcing successively closer and closer approximations to a desired, or targeted, behavior and can be a powerful method of influence.)
- Immediate gratification. Immediate reinforcement of actions with rewards is a key component of shaping behavior. This instant feedback loop could be made easier with digital tokens. The reward can be embedded directly in a digital interface so that users can see the results of their actions, as in a gamified system.
The Libra Association, which governs the digital token, could catalyze adoption by offering free Libra as an incentive to both merchants and consumers, rewarding actions such as opening a wallet to receive Libra, or giving discounts to merchants who accept the currency.
Facebook’s involvement with Libra is through a subsidiary called Calibra, which, according to company officials, is not allowed to share its financial customer data with other Facebook divisions. The company is currently under scrutiny by regulators over multiple privacy violations, and expects to be fined up to $5 billion by the US Federal Trade Commission (FTC) over privacy issues.
Could We Become Coin Operated?
The feedback loops, the immediate gratification, and the manipulation of micro-behaviors that digital tokens enable mean that tomorrow’s applications could be plugged more directly into our chemical circuitry. 27 companies were named as members of the association, including Visa, Uber, Spotify, and eBay—as well as non-profits including Kiva and Women’s World Banking. This new mechanism could be used to incentivize crucial prosocial behaviors, like the adoption of renewable energy, that could have an important positive impact on our world. Or, it could be used by brands to exert a stronger hold over consumers’ attention—and wallets.