This is the most valuable resource in today's relationship economy

This is the most valuable resource in today's relationship economy

When it comes to payments, reputation is everything. Trusted vendors are treated differently than unproven ones. This trust imbalance extends to nearly every human interaction; we trust those we know more than those we don’t. As we build relationships, we generate a unique type of resource called social capital.

Social capital is a byproduct of the relationships in our lives. It’s a resource that’s banked as relationships unfold. With social capital, it’s less quid pro quo and more that we build bonds between people which results in the feeling of community. This feeling often makes people want to help each other due to interpersonal bonds.

Quote on the social capital from The New Economy

Social capital explains why most people are more willing to help people they know. Empathy is a driving force behind the desire to help others, as it fosters a collective “we” rather than an individual “me.” There’s a feeling of support and reciprocity thanks, in part, to social capital. This invisible mesh fosters trust, builds community, and encourages cooperation among diverse groups.

Social capital theory is complex (here’s a video that explains where and how the theory diverges), but for us, it’s a foundational concept for our company’s approach to facilitating group transactions.

Social versus financial capital

When brainstorming the idea that would become Pay By Group, we realized that payments – or asking friends and family for money – often created friction.

And not only friction in the product sense that it was hard to pay by group. It was also that the fragile ecosystem of social capital is disrupted by the cold realities of money.

“We often like to think of ourselves as sociable and willing to help other people out, but previous research has been very mixed on this issue. People are very prosocial when it comes to avoiding physical harm to others, but less so when it comes to giving up money.” – Oxford University research on why helping others is difficult

Since social capital creates community among multiple individuals, the act of asking for money individualizes a situation. It’s a perceptual rupture of the unseen bonds holding a group together. For groups with shared affinities, money often makes things “dirty.”

This rupture is due to the divergent worlds of social and financial capital. Financial capital is measurable and theoretically finite. Social capital is incalculable and theoretically infinite. These two differences – the ability to be counted and how much of a resource exists – explain why it can be so painful for a group leader or person in need to ask for money from individuals.

Social and financial capital are not complementary, nor do they overlap. And, in some ways, they actually are mutually exclusive. You can have lots of financial capital in a group with no social capital, and vice versa.

In this dissonance, we saw a solution: technology that encourages and preserves social capital within a financial situation among groups.

Spending and earning social capital

Even though social capital is not explicitly trackable like financial capital, one can still spend and earn it. For anyone in large organizations, it’s about creating formal and informal bonds. Within groups, these bonds are naturally stronger as members are attracted by a shared affinity.

Regardless of size, the behavioral implications are the same. Those who help others, and become stronger members of the group, generally see more reciprocal behavior from others. Selfish, inwardly-facing individuals won’t enjoy as much success within groups because they haven’t built their social capital.

On the flip side, individuals who habitually take without reciprocating will eventually see their social capital dwindle. They violate the trust of others when not properly returning social capital that’s been spent.

Modern technology has revealed the behaviors that build and expand social capital. For example, it’s much harder to hide in a group payment situation if you’re the one who doesn’t want to pay their share. It used to be easy to get up and go to the bathroom to avoid splitting a bill. Now, bills can be quickly and equitably split – and reminders for balances owed sent automatically without emotion. This has permanently altered the mechanics of social capital.

Social capital in the digital age

So, thanks to technology, the financial and social capital aspects of human relationships have entered a new phase.

Traditional ways of building social capital (such as gifts or picking up the tab as a friendly gesture) are expanding to include the digital ecosystem. Social capital now includes likes and hearts; the social share at the center of a new currency of social capital in the digital age.

Factoid from Robert Putnam's social capital primer
Robert Putnam’s Bowling Alone sets a stark picture for managing social capital in today’s digital world (from

We’re in a new wave of digital social capital that has permanent implications on our bonds with others. The tide of digital interactions puts more importance on nurturing social capital through affinity groups.

As technologists, the question for us is whether current technologies encourage or displace social capital. As Harvard’s David Garson phrases it, “Information technology can also have an anonymizing, de-individuating effect which relaxes social norms and erodes social capital.”

The reality is that technology can build stronger networks that boost social capital – as long as we build it that way. We’re responsible for considering this factor as we shape our products to encourage groups to connect, experience, and navigate the world together.

Get your payments performance evaluation

Curious how alternative payments could help you reach revenue goals? Schedule a free checkout flow evaluation.