...in much more ways than just user-friendly interfaces.
We draw from a UK-based case study by the amazing The Decision Lab.
What can behavioral science do for fintech?
▶ Present bias – we tend to value immediate rewards more than we do future ones, leading us to splurge on present delight because it feels good in the moment. How to help people control this urge? ▶ Framing - the way a message is framed is key for motivating users towards the desired behavior. How to frame messages? ▶ Information aversion - the average user looks at their budget only once every 3 weeks. How much information is too much? ▶ Optimism bias - people are too optimistic about their ability to save and end up not saving enough, leading to stress and a toll on mental wellness. How can fintech help? ▶ Perverse incentives - Financial services that link people to financial products tend to work off commission. This creates a perverse incentive to upsell clients on services and products they might not actually need. How can fintech account for this?
Folks over at The Decision Lab (TDL) worked with a UK fintech startup to address ALL OF THESE in one app (and probably more). How did they do it? By combining behavioral finance, user-centered design, and AI-driven personalization. Here’s a sneak peek into the app:
Information overload. The app provides educational resources for users who are new to budgeting and sends personalized messages tailored to their particular level of financial confidence. No generic, unnecessary information.
Present bias. TDL worked to emphasize the immediate benefits to behaviors like saving and budgeting by designing the app such that users start to see the fruits of their proactive approach immediately, rather than wait for months or years. By encouraging them to track their financial habits as well as how they’re feeling day to day, the app helps users visualize the way progress towards long-term goals feeds back into their immediate lived experience.
Framing. The app is structured to help users keep their focus on the goals they are working towards, breaks down daunting processes into concrete tasks, and congratulates users on their progress.
Perverse incentives. The app works on a subscription model, paid by employers; any commissions required through the sale of financial products are returned to the user. By structuring itself more like an employee benefits program, it ensures that the focus stays squarely on the user’s wellbeing — their profits aren’t dependent on selling clients additional financial products, as is the case for many other services on the market.
Bonus for Employers: Could such Fintech apps be a new frontier for organizations?
The 2021 PwC Financial Wellness survey revealed that 72% of employees report being stressed about their finances and would leave for another company that demonstrates how they care about their employees’ financial well-being. In the coming years, offering employee well-being benefits is a key criterion job seekers will look for when deciding where to apply for work. Six in Ten Employees say well-being benefits will be a top priority when applying for their next role. The proportion is even higher for Gen Z and Millenials, as well as for those working in hybrid environments.