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The Gamification of Financial Education

posted by Lauren Willis

A hot trend in financial education (and elsewhere) is gamification. Make it fun and they will come, and (hopefully) learn and change! 

What is gamification? A PEW report defines it as "interactive online design that plays on people’s competitive instincts and often incorporates the use of rewards to drive action--these include virtual rewards such as points, payments, badges, discounts and 'free gifts'; and status indicators such as friend counts, re-tweets, leader boards, achievement data, progress bars and the ability to 'level up.'" The idea is to apply the fun and excitement of games to non-game activities. The explanation from the VP of one gamification consulting firm is explicit: "'It's using the dynamics and mechanics of psychology that make games so addicting, so sticky, so engaging.'"

Gamification can be used to encourage simple habit-formation (e.g., hand-washing in hospitals) or major scientific efforts (e.g., modeling a protein important for developing retroviral drugs). When used with an intent to teach information and skills rather than an intent to motivate particular actions, it is sometimes called "edutainment."

Off-line games that predate the internet era use the same basic principles. Games that teach and motivate are the staple of every parent (think of peekaboo to teach object permanence), schoolteacher (spelling bees, phys ed games) and employer (employee-of-the-month and teacher-of-the-year competitions). Even Plato suggests that educators should use gamification: "[T]he future carpenter should learn to measure or apply the line in play; and the future warrior should learn riding, or some other exercise, for amusement, and the teacher should endeavour to direct the children's inclinations and pleasures, by the help of amusements, to their final aim in life." (Plato’s Laws).

Games have also long been used to motivate purchasing behavior. The aforementioned gamification consulting firm VP calls it "behavior management" and explains: "The things that make games so compelling 'can equally make … customers addicted to your … B2C offering.'" A classic off-line example is credit card rewards programs, in which cardholders earn "points" for dollars spent, "level up" to higher status cards (Silver, Platinum, etc.) and sometimes meet "challenges" for more points (charge x amount on your card in month y for more awards). On-line gamification is more immersive, generates more immediate feedback, rewards, and a sense of competition with other players, and therefore creates more excitement. It is part of the marketing strategy for many firms selling to consumers today. 

Using competition and rewards to motivate learning and behavior seems well-suited for personal finance, an area where people need both to learn information and skills and to change behavior. A few off-line financial games such as The Stock Market Game have long been a mainstay of financial education in schools, but more recently, computer-based games have proliferated. Websites hawking financial education games target both adults (e.g., https://www.payoff.com/, http://www.creditcardio.com/, http://www.wallstreetsurvivor.com/) and children (e.g., http://financialentertainment.org/#, http://www.italladdsup.org/, http://pbskids.org/itsmylife/games/mad_money_flash.html, http://www.practicalmoneyskills.com/games/, https://jafinancepark.ja.org/Account/LogOn, http://www.playmoolah.com/b2b.html). They are sometimes called "Financial Entertainment," which according to the Doorway to Dreams Fund, "leverages the power and popularity of casual video games to engage consumers in a financial education experience that links increases in financial knowledge and confidence to financial actions and real world behavior change."

How to assess this development? Is "addicting" people to good personal finance behaviors possible? Is it a good idea?     

Research demonstrates an increase in financial knowledge and skills after playing these games, but translating that knowledge and those skills to the world outside the game is difficult, and there is as yet no reliable evidence that the games can create positive, sustained behavior change. To the contrary, one study of The Stock Market Game found that playing the game was associated with more knowledge about finance, but also with worse financial behaviors—specifically, lower levels of thrift. 

In addition to a lack of efficacy, gamified financial education poses the potential for consumer harm.

First, the commercialization of these games means that they may serve corporate rather than human interests. The PEW report explains: "Some say the move to implement more game elements in networked communications will be mostly positive, aiding education, health, business, and training. Some warn it can take the form of invisible, insidious behavioral manipulation." Many financial education games are sponsored by financial firms (e.g., the Securities Industry and Financial Markets Association (SIFMA)'s Stock Market Game, VISA's Practical Money Skills for Life games, Capital One and Junior Achievement's Finance Park games, OCBC Bank's Playmoolah). The corporate presence in financial games is little different than its presence in financial literacy education more broadly, but, as even a writer on The Wall Street Journal's personal finance blog recently noted, the corporate presence in financial education everywhere is problematic. 

A content study of The Stock Market Game is instructive, although its precise criticisms may be dated. Economist Mark Maier explains that the 8 to 12 week time span of the game perpetuates the idea that the goal of investments is to seek short-term gain rather than long-term security. The winning strategy over such a short time period is to take on as much risk as possible, investing all of the money in a wildly-fluctuating stock, with the hope that it will be high when the game closes; a diversified portfolio will never win. The materials accompanying the game suggest that people can "win" when "playing" the stock market by using casual observation; they suggest that students should use their personal knowledge of corporations (such as whether McDonalds has recently introduced a new menu item) to make investment decisions, although by the time actual consumers see such a change in business strategy it is far too late to trade on the information. These materials also portray the market as a "wise judge" of corporate performance, one that fuels our economy’s well-being (despite the fact that bank loans and retained profits fund more corporate investment than stocks); the materials make (or made, as of Maier’s writing in 2001) no references to speculative bubbles. These lessons may serve the interests of those who profit from increasing consumer investment in the stock market (i.e., SIFMA’s members), but serve actual future investors poorly.

Although some behaviors are win-win for consumers and firms, sometimes consumer and firm interests diverge; at these points the behaviors that financial education games encourage may prioritize firms over consumers. For example, Encore Capital Group, a distressed consumer debt buyer, has partnered with Payoff.com to entice debtors to play a "financial education" game that is geared to helping the debtors pay down debt. This could be win-win. But Encore, which in 2012 paid three cents on the dollar for its accounts, has an interest in seeing the debt it alleges consumers owe paid off regardless of the merits of the underlying debt claim. Encore’s subsidiaries Midland Credit Management and Midland Funding were cited by the 6th Circuit earlier this year for their "predatory" debt collection practices. Last year, Encore settled a lawsuit with the State of Minnesota with a consent judgment that addresses such concerns as "the problem that people who don’t owe the money are improperly subjected to collection requests."

Indirectly, playing financial education games may result in the unwitting revelation of much more information than consumers realize, via cookies or other internet tracking mechanisms, as well as through personality analyses of game-playing behavior. As privacy law scholar Ryan Calo explains in his paper Digital Market Manipulation, firms can use analyses of consumer on-line behavior to determine when and how to exploit consumer biases for profit. Banks can potentially use information gleaned from gamified financial education to provide additional value to consumers, but also can use it to extract additional revenue from consumers. 

Second, the gamification of financial education also normalizes gamification in the retail banking sector. This is unlikely to be in the best interests of consumers, for several reasons. 

On the one hand, financial games may reduce stress and thereby lead to improved financial decisionmaking. On the other hand, these games may lead consumers to overconfidence, poorer judgment, and overly risky behavior. A recent article advocating gamification in retail banking suggested that games should be designed for the emotional consumer, tapping into their desires and fears, rather than for the rational consumer. Psychologically, positive and arousing emotions such as excitement lead people to make riskier choices, and to be more confident in their beliefs in those choices, to the point that they ignore new information that ought to undermine that confidence. Thus, we might expect gamification to increase enjoyment of personal finance, but to also lead to overconfidence and overly risky financial behavior, even in the face of warning signs that might have been effective for a less excited, non-game-playing consumer.

Further, where there are financial winners in these games, there will also be financial losers. Witness the well-known regressive nature of credit card awards programs. To the extent that consumers who are better off financially win these games, those who are worse off may not only lose the game, but may bear increased costs used to pay prizes to the winners. 

Financial education games will certainly reach more consumers than traditional financial education. But when all of life is a game, much of life is lost. In the consumer finance realm, a serious concern is that playing the game is about maximizing a metric in the context of the rules as they are already constructed, not about changing the rules of the game. "Good" players will have a vested interest in keeping the rules as they are, and even in keeping the rules structured such that only a few "winners" collect the spoils.  The creators of financial education games may intend to aid lower-income Americans, but unwittingly may ensure that the rules of the real world of finance remain tilted against the very demographic they seek to help.

This is not to say that games are bad or that personal finance always has to be a downer. I love board games and am not above choo-choo-chooing a forkful of vegetables into my 2-year-old’s mouth. But when the stakes are financial, we need to be sure firms are not doing harm while we’re all busy playing away.



The business model of games has also changed in the last decade or so. It used to be that you would pay upfront for a game and could play all you wanted and your ability to advance or win was based simply on skill. That's the Atari and Nintendo games I grew up on.

The new gaming model is a "vice model"--sort of like what we see in casinos. You get a bit for free, but to advance you've got to put in more and more. Thus, most iPad games have a free version, but to get past the first few levels, you've got to buy stuff: ammo, health, gold, gems, etc. It doesn't matter how skilled one is--without the additional purchases, it is impossible to advance.

I find something deceptive about that basic model: absent disclosure that advancing depends on additional purchases, I assume that the ability to fully enjoy a game depends on skill. But this is where gaming is headed.

Curiously, we regulate this sort of vice model of play elsewhere: slot machines have state-mandated minimum winning percentages, I believe.

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