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 6^th 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.