What is money, exactly?
Let’s start with the word itself: money comes from moneta, the Roman translation for the Greek word, Mnemosyne—the goddess of memory. Etymologically speaking, money is, according to anthropologist Keith Hart, a “memory bank.”
Now let’s apply that to modern times. University of Virginia assistant professor of Media Studies, Lana Swartz, discusses the origins (and evolution) of money in her book, New Money: How Payment Became Social Media:
[Money] is a shared credit, a way of remembering promises of value, projecting them into the future, and sharing them with other members of an economy, a society, or a transactional community… It is a distributed, invisible record of human exchange.
The very origins of writing point to an emerging relationship between money and memory: accounting ledgers. Budding agriculturists needed to account for their trades: I’ll give you five bushels of wheat for those three chickens. They also needed to keep tabs on their stock: I have 10 tons of rice in my storage bins.
That’s right: the form of communication that would evolve into poetry and allow mythologies to spread around the world began with asset management. The first Shakespeare was a bookkeeper.
Let’s keep moving forward. Money is “the system of credit accounts and their clearing that currency represents,” writes economist Felix Martin in Money: The Unauthorized Biography. Historically, money has assumed many forms—it’s not always completely invisible, as the bills in your wallet prove—though as Martin notes, 90 percent of US money and 97 percent of UK money has no physical existence at all.
It consists merely of our account balances at our banks.
Is it any surprise, then, that money is now predominantly a string of numbers that we can access from a device in our pocket? Not at all, though in reality, money hasn’t moved that far from its intention—a system of credit accounts and their clearing.
Because money moves through transactional communities, it’s also a form of communication, writes Swartz. She notes that “communication” was once synonymous with “transportation,” as money would have to be physically moved by roads, rails, and canals. Applying the analogy to digital space isn’t a stretch as those numbers are still being carried across networks.
Swartz investigates what the philosopher Immanuel Kant called “the greatest and most usable for all the means of human communication through things.” Communication is not only how we document the world. It’s how we construct our reality.
“Money,” she writes, “is informational, symbolic, expressive, and mediated. It is communication, communicative, and communicated.” This is as true when ancient civilizations assessed value through the trade of various assets, coins, and livestock as today, when money is shuttled through apps to split dinner or pay rent—the more emojis used in Venmo, the better.
Loyalty as currency
One of the most interesting use cases Swartz discusses is something close to us at Eco: rewards programs. Whereas Venmo’s social media stream has become an opportunity for peacocking—look at what I bought last night—rewards programs attempt to captivate us in a different way: by trading products and services for loyalty.
An allegiance to certain companies for a perceived boost in status—tiered rewards programs, she writes, place us squarely in our own hierarchical transactional communities—helps us understand the direction in which money actually flows.
When companies began offering “rewards” in the mid-20th century, they were effectively creating the idea of loyalty as currency (though prototypes date back to ancient Egypt). The equation seems simple enough: buy our products and we’ll reward you with a freebie once in a while. Innovations over the ensuing decades involved partnering with other brands that would accept your customer’s loyalty (in the form of “trade marks,” tickets, stamps, box tops, and eventually digital points). Just like money, the form changed while the philosophy remained.
Unlike many transactional communities where money can be bartered and terms debated, rewards customers are bound by rules the issuing company sets—and, as many credit card, hotel, and airline programs have proven, those terms often shift.
For example, Marriott Bonvoy rewards members helplessly watched as their points were devalued in March, 2020; in April, 2021, Southwest Airlines celebrated its 50th anniversary by raising flight redemption points by 6.5 percent. This follows a trend in airline rewards programs: Delta, United, and Virgin Atlantic have all devalued customer points over the last year.
In a time when everyone is afforded a voice with social media, money as a communication tool flows differently through the walled gardens of rewards programs. As Swartz writes,
Loyalty is already money, but only within the transactional communities that it constitutes.
Outside the dictates of Amex, for example, points are worthless; if Bonvoy wants to double the points needed for a hotel room, the value of your loyalty is cut in half.
The cost of rewards
Swartz calls both currencies, money and loyalty, wayfinding tools, as they define the communities they operate within. Rather than opening up the world, however, rewards programs have a tendency to restrict borders, for their “place-making function is determined by where it is accepted. Because these communities are niche rather than universal, closed rather than open, loyalty creates invisible walled gardens.”
Those gardens only grow through the shared belief of the community tending to it. An expectation of reciprocity follows loyalty, which, as Swartz notes, has created perverse incentives by the landlords. When you drill down into their programs, there’s only one clear winner.
Consider interchange fees. These are fees that a merchant’s bank, the “acquirer,” pays a credit card customer’s bank, the “issuer,” whenever you swipe your card. The merchant ends up absorbing this fee because they want the customer’s business. But it doesn’t end there: oftentimes the merchant inflates prices to cover for these excess fees, making their products and services more expensive for everyone.
The complexity continues when factoring in loyalty programs. A top-tier rewards card, like Amex Black or Chase Sapphire, results in up to a 2.40 percent fee, whereas regular credit cards hover in the 1.51 percent fee range. While this seems straightforward enough—I pay more for my expensive rewards card and so should receive more benefits—the result is a system in which most parties lose. As Swartz writes,
The economics of interchange make little sense according to traditional market logic because it's one of the rare situations in which competition, on the part of issuers competing for the ‘best customers,’ drives prices up—for merchants, acquirers, and potentially consumers.
The confusion doesn’t end there. Swartz points out that the rewards often serve as a cover for a robust data-gathering operation. Paypal, for example, shares consumer data with roughly 600 companies. Those points you’re racking up for travel vouchers or eGift cards are subsidized by the revenue Paypal makes selling your data to merchants interested in knowing how, when, and what you purchase. You might be locked into Paypal’s walled garden, but the boundaries are rather porous when moving in the other direction.
Loyalty programs, Swartz concludes, “are unreliable, unaccountable, and inconsistent, subject to being phased out, rolled into other programs, or changed beyond recognition.” When Marriott bought Starwood, loyal guests had few options beyond leaving the program and losing all of the value they’d accrued, or voicing discontent on Reddit, which they did in droves. As commenters on one contentious Reddit post wrote,
- “3x Marriott points these days aren't worth as much with the impending devaluation of peak rates coming in.”
- “My biggest takeaway from this is the AMEX biz card increasing the annual fee by ~25% and adding zero benefits for the 99% of customers who don't spend 60k a year on the card.”
- “They should have taken the opportunity to collapse the redundant tiers. Six separate elite tiers, really?”
- “I read the price increase, and then looked for the associated benefits and couldn’t see any.”
Marriott continues to devalue their points today. Loyal users are left to, in the words of economist Albert Hirschman, exit and leave the program (and all their points/value) or voice their opinion in hopes of affecting change. In a closed system, there are few good choices given the control that companies have over your loyalty and the money it generates.
Money’s effectiveness, Swartz concludes, “comes not just from trust but from ubiquity.” Top-tier rewards programs spend a lot of money to become ubiquitous, but with the absence of trust, the relationship with their loyal patrons will one day erode. In this model ubiquity often precedes trust, though the latter can be lost regardless of pervasiveness.
The foundation of any form of money relies on the social relations built on shared belief.
People will leave if they don’t like what they see when the curtain is pulled back. When companies break that trust by tilting the system in their favor, new forms of currency rush in to fill the void. Society, Swartz notes, is not a fixed concept, and so one of our main communication channels, money, “can be similarly fluid.”
When the reward for patronage is abused, new money emerges in the spaces where trust was broken.