Behavioral Economics

Article: How Behavioral Economics is Helping Banks Drive Better Money

Management Experiences
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Overcoming “Present Bias” to Save for the Future
 People often struggle to imagine themselves in the future, so the future
doesn’t feel real. This is called “Present Bias,” and it can make it hard for
people to save money.
 Financial institutions need to help customers overcome “Present Bias” by
visualizing the future and by making it automatic to save for the future. By
making saving automatic, customers can save more money than they might
have realized was possible – without having to take any action, make any
decisions, or feel like they are sacrificing from their present-day spending.
Beat the “Anchoring” Problem with Relevant, Influential Numbers
 Another cognitive bias in money decisions is called the “Anchoring” problem.
When people are researching a financial decision, they tend to remember the
first number they see or hear. This first number then becomes the reference
point or “anchor” for future decisions.
 “Anchoring” can cause people to spend too much or save too little. If John
tells his friend Charlie that John saves $100 a month, Charlie might assume
that $100 is a typical amount of savings – even if Charlie can comfortably
save more than that.
 Showing people relevant information based on their own customer
transaction data is an important way that financial institutions can overcome
cognitive bias.
 When people see their true potential to save money and build financial
resilience, they can make better decisions with the power of data.
Zeigarnik Effect: Help People Save Without Being Overwhelmed
 Another psychological phenomenon from behavioral economics, the Zeigarnik
Effect, shows that people don’t like doing open-ended tasks. When a job is
never “done,” it disturbs us and creates tension in our brains. As a result,
people tend to procrastinate on jobs that they know will take a long time to
finish.
 Saving money is one of the most common “open-ended” jobs to be done in
finance. People often don’t know how to start saving, and they feel
overwhelmed. So instead, they just keep spending.
Reducing “Friction” for Financial Wellness
 Another cognitive bias that harms people’s decision-making is called
“Friction” – the little moments of de-motivating difficulty and distraction that
cause people to quit. Friction can make people give up on applying for a loan,
 opening a savings account, enrolling in a retirement plan, or making complex
decisions about their money.

“Nudge Theory” for Banking: Guiding People to Better Money Decisions

 “Nudge Theory” is another concept of behavioral economics that can help
people make better choices about money. “Nudges” are a way of influencing
people’s behavior in a positive, encouraging way – without restricting
people’s freedom of choice. People often respond better to nudges than they
do to strict rules or penalties – people like to be helped, not feel forced.
 In the banking experience, financial institutions can use “nudges” by sending
friendly reminders and alerts to their customers, such as notifying them that
they are about to have a low balance in their checking account.
 Another aspect of Nudge Theory is the behavioral economics concept of
“boosts.”
 When people visualize their financial future, they tend to feel more motivated
to save. “Boosts” can help train people in new ways of thinking about their
financial futures.
 When you give people a visual image of why they’re saving, they will be more
likely to identify with that savings goal.
 Behavioral economics researchers found that when people are shown a time-
lapsed projection image of their own photo as a future retirement-aged
person, people are more motivated to save for retirement.
 Financial institutions can use Temptation Bundling to motivate people with
specialized savings goals, personalized offers from business partners,
customer-specific rewards programs, and more. By understanding the
psychological concepts that affect people’s financial decision-making, you
can use behavioral economics to design a better banking experience.

eBook: How Banks Can Use Behavioral Economics to Improve Customer Financial
Wellness and Drive Business Impact
Weaving elements of behavioral economics into financial experience design offers
the potential to protect consumers from inherent biases and create more effective
approaches to improving consumers’ financial capability.
The Role of Behavioral Economics in Digital Banking
 That’s because people’s decisions are affected by cognitive biases from
complex cultural, emotional, and social factors. People are vulnerable to
misinformation and mental shortcuts that lead them astray.
 When financial institutions include behavioral economics and automation
technology in their product design and customer engagement; they can help
people overcome their cognitive biases. By understanding the complex,
 imperfect, all-toohuman ways that people make decisions, the financial
industry can help customers save more money, invest for retirement, and
make smarter day-to-day choices about money management.
Why People Make Bad Financial Decisions
 By understanding behavioral economics, banks can design products and
services to better serve their customers – grounded in the complex and
sometimes messy reality of how people make choices in their financial lives.
 People tend to make short-sighted decisions about money and often act
against their best long-term interests.
How can behavioral economics help people make better financial decisions?
 Historically, banks largely assumed that people are broadly rational and that
if you provide them with enough information, they’ll make sensible choices
about their money. Banks focused on educating people about financial
products and services – with limited effect.
 For example, people often avoid looking at financial information because it
feels overwhelming, and they are afraid of bad news. Many people are afraid
to check their bank statements or open a letter from their insurance
company. This partially explains why sharing more information about your
banking products with your customers doesn’t always lead to better
outcomes: people get overloaded and overwhelmed.
 This makes it easier and more natural to help customers to save, effectively
“reverse engineering” good decisions, or “nudging” people to do the right
thing.

The “Present Bias” problem: People don’t save for the future because they prefer
immediate gratification
 People tend to prioritize their current needs over their long-term needs – even
if their current needs (or “wants”) are much less important than their
longterm goals. This is called “Present Bias.”
 People also find it hard to imagine themselves far in the future, so the future
doesn’t feel real. It doesn’t feel like they’ll pay a personal price for irrational
financial decisions…until it’s too late.
Solution:
 The solution to present bias: Clients will prefer future goals to immediate
ones if the bank helps them visualize the future.

How to overcome the Present bias in your banking experience

1. Automated savings programs
Can help make it easier for people to save more money, by taking
some aspects of savings entirely out of the customers’ hands and
 bypassing their present bias. Make sure that the signup process is as
frictionless as possible, with just a few clicks.
2. Goal Setting
Once the customer is set up for an automated savings program, the
customers don’t have to actively decide to prioritize their own future
needs, which so many people find difficult.
3. Leverage predictive analytics
To continually analyze the customers’ real-time transaction data and
financial behavior, and automatically adjusts the amounts transferred,
sometimes just a few dollars per day.

With automated savings programs, the customer does not have to

remember to do anything, they don’t have to decide when to make a
transfer to savings, and they don’t have to worry about how much
money is left in their checking account. Personetics takes the cognitive
load out of saving.

The “Anchoring” problem: People’s financial judgment is distorted by the first

number they see
 When people are researching a new purchase or financial topic, the first
number they see tends to take on outsized importance in their minds.
That first number (high or low) becomes people’s reference point for all
future data, and it can undermine their decisions in illogical ways.
 This type of cognitive bias is called “Anchoring” because people’s financial
expectations get weighed down and f ixed in place by the first number
they encounter.

Solution
 Banks should deliberately show customers numbers that are tailored to their
own circumstances.
 Hyper-personalization – When customers have their own dashboard, showing
exactly where their money is going, what their saving goals are, how much
they’ve saved so far, and how much they’ve spent in the past month – all
based on their own financial transaction data.
 By analyzing customer financial data, f inancial institutions can offer
personalized insights and recommendations for: • How much additional
money the customer can afford to save • How to save for specific financial
goals • How to spend smarter without worrying about low balance issues or
“keeping up with the neighbors”
 Use interactive quizzes to show customers how much they can save. Instead
of expecting customers to figure out their own savings goals with guesswork,
financial institutions can help them visualize their savings targets. Our
engagement platform offers personalized Savings Quiz insights that show
customers how you can help them save.
The Zeigarnik Effect: People don’t start saving because it feels overwhelming
 As a result, people subconsciously delay tasks that they know will take them
a long time to finish. They know that their brain will feel uncomfortable with
the pain of that open-endedness, so they procrastinate.
 If you want people to complete a complex task, like “saving money for the
future,” the most important step is the first one. As soon as people start, an
“open loop” opens in their brain, and they feel an urge to complete the task
which won’t go away until they’re done.
 How to use the Zeigarnik Effect to influence positive banking behavior:
Encourage people to save by showing them their progress.
Solution
 Make that first step as easy as possible.
 Then, to keep people’s minds focused on the goal, give them frequent status
updates. Remind them that they have a task that has not yet been
completed, and they’ll be more likely to engage with it, because their
subconscious wants to tie up loose ends.
 Make it easy for people to start the saving application process. Then break up
the task into smaller units so they make progress, and send them frequent
reminders to keep going, so that their brain remains aware that the task is
not done.

The Friction problem: People give up on saving at the f irst sign of trouble
 “Quitters never win” is a popular saying, but the truth is: many people are
eager to quit. People often struggle to continue healthy habits or complete
simple tasks because of seemingly insignificant obstacles and delays known
as “friction.”
Solution
 Making the loan or saving request simpler, to encourage people to check
their bank balance more often
 Reduce the number of clicks to completion that a customer is required to
make to open a savings account. Try to move from 20 clicks to 3 clicks
 Set "default opt-in” options for financial education content or savings
accounts. If you require people to make extra efforts to choose not to receive
financial education or to choose not to set up a savings program, you can
help improve their f inancial wellness by default.
How to use friction to improve the banking customer experience
 One of the biggest frictions in banking is when customers must make all
their own financial decisions, without being able to get helpful f inancial
advice. When customers are expected to evaluate and manage too many
 complex f inancial decisions, this can cause stress and anxiety and stop
them from taking positive f inancial actions, like saving more.

Nudges, Boosts and Temptation Bundling: Helping people make better choices
without feeling forced
 The “Nudge Theory” is a behavioral economics approach to guiding
people’s behavior and encouraging them to make better choices.
 They call this “Nudge Theory” because it enables organizations to subtly
remind, guide, and gently push people to do the right thing. The
mechanisms of the nudge are the power of suggestion and positive re-
enforcement. But even while being “nudged,” people keep their freedom
of choice and can easily choose a different path.
 For example: Sending bank customers an alert that they are about to go
into overdraft. Customers are not required or compelled to respond to the
reminder, but it keeps them aware of their financial situation and suggests
that action should be taken.
 “Boosting” is a way to help people “boost” their ability to make better
choices, by training them in new skills and new ways of thinking about
their f inancial situation. A psychology research paper from 2017 found
that people could be taught to increase their retirement savings not by
“rational” explanations of compound interest and portfolio diversification,
but from a simple “boost:” by getting people to identify more with their
future selves
 If you show people what their future looks like, they'll be able to make
better decisions today. Likewise, visual examples help make the future
goal more concrete. A classic example: if you’re saving for a vacation, put
a picture of the beach on your desk at work. People like to be reminded of
what they’re working for, so their sacrifices can feel more purposeful, and
the future feels more possible.
 There’s an old saying that to give people incentives, you can use
“carrots” (positive rewards) and “sticks” (negative punishments). But what
if you could combine these two forces? That is the concept of “temptation
bundling.” With temptation bundling, people can “bundle” a positive
experience or activity with a perhaps less pleasant but necessary and
healthy activity.
 When people make progress on a savings goal, or invest a certain amount
of money for retirement, they can “bundle” this selfdiscipline with a
positive indulgence, such as a new pair of shoes or a vacation. Banks can
create specialized savings goals with incentive-based programs to help
reward people for sticking with their savings plans: combine short-term
pleasure with longterm gains.
 With the power of Open Finance, financial institutions can make
personalized offers from business partners. For example, if your customers
meet their savings goal for the month, you could show them a
personalized credit card offer with extra rewards points for spending on a
 weekend vacation or a nice restaurant dinner. Along with encouraging
customers to save, you can show them how to spend in a more thoughtful,
deliberate way.
Choice Architecture: Designing Your Customer Experience with Behavioral
Economics to Improve Financial Wellness
 How can financial institutions begin to implement these concepts with an
overall framework? Another concept from behavioral economics that also
intersects with Customer Experience (CX) design is the field of choice
architecture.
 Choice architecture is a way of designing the customer experience to help
people make the best possible decisions. Along with giving people good
options to improve their financial wellbeing, banks need to think carefully
about their user interface and user experience (UX) to make sure they are
guiding people through the decision-making process in a way that is fair,
clear, and beneficial to the customer.

Recommendations
1. Reduce choice overload: People get overwhelmed by too many choices.
Give them a simple checklist or decision tree to help arrive at an easier
decision.
2. Provide default choices: You might give people the option to “opt in” to
receiving a newsletter, or “opt out” of signing up for automated savings
programs.
3. Choice over time: Show people the long-term benefits of choosing to save
and invest, such as by showing them how much their money has grown or
how much growth they could have gotten if they had invested more.
How to support your customers’ financial wellness with behavioral
economics:
 Target educational content and relevant product offers based on
personalized, actionable insights from customer data.
 Help customers establish specific financial goals for “jobs to be done”
in their financial lives, such as save money, manage debt, or build
wealth.
 Celebrate progress: by showing your customers how they are making
progress toward their goals, you can help them maintain their sense of
discipline and momentum and give them the confidence to enjoy some
short-term indulgences along the way.

Articulo 2: ¿Los SMS nudges promueven la salud financiera?

Cuatro componentes de la salud financiera: 1. Gestión adecuada de las finanzas
para el cumplimiento de las obligaciones financieras y las necesidades de corto
plazo, 2. Capacidad de absorber y recuperarse de choques financieros en el ingreso,
3. Capacidad de alcanzar metas futuras, y 4. Sentirse seguro y en control de las
finanzas
Un nudge “es cualquier aspecto de la arquitectura de las decisiones que modifica la
conducta de las personas de una manera predecible sin prohibir ninguna opción ni
cambiar de forma significativa sus incentivos económicos. Para que se pueda
considerar como nudge, debe ser barato y fácil de evitar. Los nudges no son
órdenes”
El IPA identifica tres estrategias en las que los nudges pueden incidir en mejorar la
salud financiera (Burke & Loiseau, 2018):
1. Diseñar mecanismos de compromiso en el ahorro, en los cuales los clientes
tengan costos monetarios o psicológicos por no ahorrar;
2. Fijar opciones por defecto, por ejemplo, que una parte de los ingresos se
depositen en una cuenta de ahorro, a menos que el cliente tome la decisión
de no participar; y
3. Mandar recordatorios, lo cual ayuda a la gente a ahorrar más o a pagar a
tiempo sus compromisos financieros.

Sobre el BBVA Perú

 Madre de Dios
Empresas
Huancavelica

en el Exterior
Lambayeque
La Libertad

Sucursales
San Martín
Cajamarca

Moquegua
Amazonas

Ayacucho
Apurímac

Arequipa

Huánuco

Tumbes

TOTAL
Ancash

Ucayali
Loreto
Callao

Cusco

Tacna
Pasco
Junín

Piura

Puno
Lima

total lima
Ica

B. BBVA Perú 1 5 3 13 1 4 13 8 - 3 5 9 11 7 185 4 1 2 1 9 3 6 2 1 3 - 300 20% 25%

BANCOM - - - 1 - - - 1 - - 1 1 1 1 11 1 - - - 2 - - - - - - 20 1% 1%

B. de Crédito del Perú (con sucursales en el

3 8 2 16 2 4 8 9 1 3 8 13 11 7 163 4 1 5 3 11 4 6 4 1 3 2 302 21% 22%
exterior)

B. Pichincha - 2 - 1 - 2 1 1 - - 2 2 1 1 23 1 - - - 2 2 1 1 1 1 - 45 3% 3%

B. Interamericano de Finanzas - 1 - 2 - 1 2 2 - - 3 1 2 2 38 1 - - - 3 1 1 1 - 1 - 62 4% 5%

Scotiabank Perú - 3 1 7 - 4 6 4 - 2 4 4 7 4 110 1 1 2 1 6 2 2 2 1 2 - 176 12% 15%

Citibank - - - - - - - - - - - - - - 1 - - - - - - - - - - - 1 0% 0%

Interbank - 3 2 6 1 2 6 3 - 1 7 4 6 3 83 2 1 2 1 7 3 2 2 1 2 - 150 10% 11%

Mibanco 3 16 3 21 5 16 6 17 3 5 5 11 15 14 67 1 - 3 3 21 17 7 4 3 2 - 268 18% 9%

B. GNB - - - 1 - - - - - - - - 1 1 7 - - - - 1 - - - - - - 11 1% 1%

B. Falabella Perú - 1 - 3 - 1 2 1 - 1 2 1 4 1 27 1 - - - 4 - - 1 - 1 - 51 3% 4%

B. Santander Perú - - - - - - - - - - - - - - 1 - - - - - - - - - - - 1 0% 0%

B. Ripley - 1 - 2 - 1 1 - - - 1 1 2 2 18 1 - - - 2 1 - - - 1 - 34 2% 2%

Alfin Banco - 2 - 2 - 1 1 1 - 1 3 1 2 2 18 1 - - - 3 1 1 1 - 1 - 42 3% 2%

B. ICBC - - - - - - - - - - - - - - 1 - - - - - - - - - - - 1 0% 0%

Bank of China - - - - - - - - - - - - - - 1 - - - - - - - - - - - 1 0% 0%

Banco BCI Perú - - - - - - - - - - - - - - 1 - - - - - - - - - - - 1 0% 0%

7 42 11 75 9 36 46 47 4 16 41 48 63 45 755 18 4 14 9 71 34 26 18 8 17 2 1 466
TOTAL BANCA MÚLTIPLE

Fuente: Anexo N° 10 Depósitos, Colocaciones y Personal por Oficina.

0.5% 2.9% 0.8% 5.1% 0.6% 2.5% 3.1% 3.2% 0.3% 1.1% 2.8% 3.3% 4.3% 3.1% 51.5% 1.2% 0.3% 1.0% 0.6% 4.8% 2.3% 1.8% 1.2% 0.5% 1.2% 0.1%
Onboarding:

1. Como esta articulada el area

- 3 bloques:
1. marketing research – investigaciones centralizadas,
cuanti/cuali/experimento. La guía, el brief, la muestra. El estudio lo
centralizan ellos, dashboard nosotros hacemos la interpretación.

2. Capacity Building – No participa en la ejecución, en otros equipos aplican

behavioral economics. Trabajar con los equipos de monetización (comercial)
Personas que están dentro del equipo

3. Internal consulting – Apertura de nuevas líneas. Full ejecución. Llevar a cabo

intervenciones end-to-end. Cada vez adoptemos una organización estratégica
en la organización.

a. Trabajo con ventas digitales: optimización de funnel digital. Áreas de

oportunidad para mitigar.
b. Cobranza: directamente con el equipo de riesgo. Segmentación mas
robusta.
c. Pricing: Intervenciones/Proyectos vinculados a fijación de precios con
productos del banco. Estrategias de fijación de precios. Equipo de data,
modelos predictivos.
d. Herramientas de la buena venta: Entender el journey de comunicación del
producto, en las oficinas con los clientes. 3 o 4 productos. Piloto de
herramientas de buen producto: hipotecario. Encuesta con los ejecutivos,
base de datos.
11 de junio. Arranco el 11 de marzo.
e. Smart Pos - Open Pay // POS. Idea: Smart Pos, evolucione a 2 niveles. Top
de la cartera. El proyecto arranco en semana santa. Metodología de
trabajo. Lanzamos una primera petición de datos. Todos los jueves hay
sesión con responsable del producto.
Coordinar con el equipo de investigación – entrevistas con los ejecutivos.
Entrevistas ad-hoc, a primera mano. Como es todo el proceso. Buenas
practicas.
Oficina, Fuerza de venta en campo, Telemarketing.
Calendario para identificar fechas tentativas.
Compartirlo al equipo de investigación
Guia para seguir el brief de investigación
Que preguntas consideramos relevantes
f. Experiencia única: mundo de la red. Construir un framework de trabajo,
colaboración.
Modelo de governance.
Capacitacion con el framework del trabajo.
Como pas hacia el material al ejecutivo.
 Entrar con ella, y que vaya viendo las sesiones de trabajo con el equipo de
Mexico.

4. Proyectos

1. Smart POS
2. Herramienta de la Buena venta:
3. Crear confianza. Journey.
4. Palancas comportamentales clave.
5. Dependiente del journey.
6. Personalizado, cercano
7. Tener cuidado con como se comunica
Frameworks de construcción de materiales
- Montar el steerco.
- Ideal: status de investigaciones al ejecutivo, tamaño de la muestra.
- Primer levantamiento de los materiales que hay ahora, para identificar áreas de
oportunidad. Fase: momento de la venta.
- Status de la petición de datos.
- Aterrizarlo en un journey
- El equipo paso un benchmark. Entender más a la competencia. Entender los
productos. Que atributos están cobrando. Pricing Smart pos.

Segunda sesión onboarding

Smart POS
- Identificar oportunidades a partir de lo que hay
- Quedar a hablar con el para que nos lo comparta
- Roadmap del equipo de adquirencia
- Benchmark y desglose de la propuesta de valor
- Adquirencia: Open Pay y Adquirente
- BEC CIB, Adquirente: BCOM
- PinPad – CIB: es muy particular
- Protocolo de venta
- Speech de uso
- Analizar con calma, fricciones y área de oportunidad
- SteerCo: Look and feel, como trasladar los mensajes. Estructura, como levantar las
cosas.
- Identificación de herramientas.
- El ejercicio gira en torno a un journey, momento de contacto entre el ejecutivo y
un cliente.
- En el contacto inicil.

Canales: ejecutivos, fuvex de campo y telemkt

18 entrevistas – 6 6 6
- 13: llevar un primer insight
Within the field of behavioral finance, there are five main concepts
that are studied:

 Mental accounting: People tend to allocate money for

specific purposes, even if it may not be the most rational
choice.

 Herd behavior: People often mimic the financial behaviors of

the majority, which can lead to dramatic rallies or sell-offs in
the stock market.

 Emotional gap: Decision-making can be influenced by

extreme emotions such as anxiety, fear, or excitement, which
can lead to irrational choices.

 Anchoring: Spending can be attached to a certain reference,

such as a budget level or satisfaction utility, leading to
consistent or rationalized spending.

 Self-attribution: Individuals can make choices based on

overconfidence in their own knowledge or skill, even when
objectively falling short. This often stems from an inborn talent
in a particular area, leading to ranking one’s knowledge higher
than others.

Attractiveness of Free
 People love getting free items when making decisions. Fintech
companies capitalize on this by offering free features to lure
users into hitting the “Download” or “Sign up” button.
Social Proof
 People tend to want a product or a service when they know
that others are already using it. Fintechs take advantage of
this psychological bias if they ensure that customers see how
many people use certain features or items.

Authority
 In decision-making, people tend to trust influencers and
outsource some of their efforts to field experts. Fintechs work
hard to be featured in relevant media outlets and get endorsed
by established professionals, as this builds business’
legitimacy.

Category Heuristics
**Heuristics **are mental shortcuts that our brains use to solve
problems and make judgments. People prefer simple categories
over complex intertwined concepts from financial math. That’s why
fintechs write in simple English, easy to understand for anyone.

The Power of Now

Immediate gratification is preferred over delayed satisfaction.
Fintech companies excel at delivering instant results by utilizing the
speed of digital transactions.

Scarcity
While fintech companies aim for scalability, they also understand
the value of scarcity in driving demand. Limited availability or time-
sensitive offers can increase interest in a product or service.

How Should Organizations best embed and harness behavioural insights? A

playbook
What is the field of Behavioural Insights?
 ‘Econs’ are hypothetical individuals who have well-defined preferences, are
able to accurately predict future consequences of their actions, have
immense computational abilities, and are unemotional. Humans, on the other
hand, are impulsive, cognitively lazy, emotional and computationally
constrained**. Empathy gaps occur when organizations design products,
processes and programs for econs, when in fact the end user is a human!
 Research shows that behaviour of humans differs from that of ‘econs’ in
significant ways. For instance, factors including: context, cognitive laziness,
procrastination, and social pressure play key roles in human decision making.
The field of behavioural insights works to connect the psychology of human
behaviour with economic decision-making to explain these phenomena. In
dealing with human agents, organizations should assume that they will
procrastinate, get tripped up with information or choice complexity, might
forget, or will act emotionally.
 Economist: “Incentivize behaviour” Impose a tax on choosing Option A or
provide a benefit for choosing Option B
 Marketer: “Persuade people” Make Option B appear more attractive through
messaging and persuasive advertising
 Behavioural Scientist: “Nudge people into better choices” Create an
environment where it is easy for people to choose Option B rather than
Option A
What can BI do for my organization?
What are the applications of BI
 Choice Architecture: Designing choice contexts to steer choices (also known
as nudging)
  Decision Making Tools: Tools that help agents make better choices by
providing feedback, rules of thumb, computational support, decision support
or peer comparisons.
 Behaviourally Informed Design: Combining the principles of BI with design
thinking to create behaviourally informed products, policy and processes
 Self-Control Products: Products that allow customers to close the intention-
action gap by
 imposing a cost on undesirable behaviours**

A cascade of BI Roles in Organizations

 BI as Problem Solver: The behavioural scientist is tasked with looking at
problems arising with the adoption or use of existing products or services of
the organization (e.g., low take-up rates, poor sales, low conversion rates,
failure to act on plans). In this role, BI solves the ‘Last Mile’ problem which
involves making small changes to help better align the product/service with
human behaviour.
 BI as auditor: At the end of every design process for products or processes, a
behavioural scientist is tasked with auditing the outcome and evaluating for
human centricity. In this role, BI continually evaluates and provides
suggestions for “humanizing” organizational outputs.
 BI as designer: A behavioural scientist is involved in all design processes,
ensuring that the design of a product or service is behaviourally informed to
begin with. Placing the behavioural scientist at the designer stage lowers the
pressure on their roles as auditors or problem solvers.
 BI as Chief Strategist: All processes in an organization (involving internal and
external stakeholders) are run with a behavioural perspective; using
empiricism as the basis for all decision making. Organization is human centric
in everything that it does. In this role, BI is the operating principle of the
organization!
What Resources do I need to develop
 EXPERTISE: The skills required inside the organization to apply BI. These
include behavioural science (and understanding of human psychology),
behavioural engineering (choice architecture and the approaches of
behaviour change) and data & empirical science (analytics,
experimental design, and ability to analyze and interpret
experiments).
 AGILITY: An organizational structure and processes that allow for quick
feedback loops to be incorporated, and for the organization to be able to
change course so that a test-learn-adapt* strategy can be put in place. Agile
organizations also have an appreciation for the complete canvas of BI
applications.
 EMPIRICISM: A mindset that data (rather than theory or a pre-committed
course of action) drive decision making in the organization. This mindset calls
for an empathic mindset at the intersection of BI and design thinking**, and a
 relentless desire to test using experiments through RCT’s or other
methodologies.
What do I need to consider in experimentation?
 Population: Access to suitable populations and transaction cost
 Randomization: Identification and ability to randomize
 Institutional Factors: Ethics charter used to experiment, organizational culture
rewards experimentation (no fear of failing)
 Outcomes: Short feedback loops and easy to observe outcomes
 In the perfect experiment, participants need to be randomly assigned to
different versions of interventions (treatments).

Behavioral Design for digital financial services

How to increase engagement with products and services that build financial health.

1. Capture Attention
2. Inspire trust and confidence
3. Simplify the decision
4. Facilitate Action

Understanding the challenges your users face

To identify the challenges your users struggle with most, you’ll need a deep
understanding of the situations and external constraints they typically face. A mix of
qualitative and quantitative research methods can help you gain insight and test
your assumptions about your users.
 Qualitative Research Methods:
Understand your users’ behaviors, beliefs, opinions, emotions, relationships,
and context One-on-one user interviews are a good starting point for deep
learning about barriers. You’ll learn most by asking “how” questions, talking
through specific past experiences, and asking about the process. Asking
“why” questions requires users to understand and explain their own behavior
(which we all struggle to do).
 o Direct observation can help you map out the sequence of events,
understand how actions are completed, and see how consumers react
within an environment. Tools like Fullstory and Swrve can help you
identify actual points of drop off and engagement in a digital
environment.

o Surveys and questionnaires can help you gather data when

administrative data isn’t sufficient to paint a full picture.

o Putting yourself in the user’s shoes and trying out elements of a

product or service on your own can help you get a better sense of
where they’re encountering hang-ups.

Quantitative Research Methods: Understand drop-off points and measure impact

o Administrative data from existing systems are often underused but can
offer quick insights and help you identify patterns of use and critical
drop-off points.
o Randomized Controlled Trials (RCTs) are simple experiments that can
accurately measure the impact of products and services.
o A/B tests, a type of Randomized Controlled Trial, measure and compare
the effectiveness of different versions of a program feature, service, or
communication.
Secondary Research: Read about what other researchers and practitioners are
learning in
the field
o The Behavioral Evidence Hub compiles innovative solutions from behavioral
science that have been proven to amplify the impact of programs, products,
and services.

Capture Attention
The challenge:
o We have limited capacity for attending to the world around us, and digital
financial services may never even enter that line of sight.
o Reminders and alerts may pop up for a moment, but may not arrive at the
right time, with a compelling message, or with a natural action step—and
ultimately may be forgotten.
 o Even if a new product does capture attention, we tend to overestimate the
costs of switching to something new and choose instead to stick with
products and services we already use.
o In the absence of human interaction, outreach that feels impersonal or
institutional can fade into the background.
Warning signs:
o Low engagement with marketing campaigns
o Low traffic on your website
o People using your product only one or twice
o Feedback from consumers that they already have another solution in place

The science of limited attention: People tend to notice and respond to one aspect of
their environment at a time. We automatically pay attention to what stands out—not
necessarily what’s most important. As a result, we can completely miss critical
information or even physical objects that are right in front of us.

Design Principle #1: Align with a moment of need.

 Once you’ve identified a specific moment of need that your product solves,
make sure that it’s easy for users to quickly understand what your product
does (see “Simplify the Decision”) and give them a clear next step to
complete (see “Facilitate Action”).
 Offering discounts, prizes, or gifts to try a new product is a common practice.
But while economists may think of incentives as a way to sway a consumer’s
cost-benefit analysis, it’s not necessarily the amount of the incentive that
matters—it’s the attention-grabbing effect. Behavioral science research
suggests that even small rewards or prizes can be an effective (and relatively
inexpensive) way of drawing attention to the opportunity to take up or use a
tool, especially when delivered at the right time and aligned with an actual
need.

Caution!
Be mindful of overloading the user when they’re in a rush, trying to do
something else, or have limited mental bandwidth for a new task. Trying to divert
attention in a “low bandwidth” moment can backfire.
 Incentives can help if the problem is that users don’t know about your
product or underestimate the value of trying it. However, they won’t lead to
sustained usage if you have bigger barriers to overcome. Even micro-incentives add
up over time.

Design Principle #2: Reminders and alerts need to be “smart”.

However, these features must be well-timed, vivid and well-structured: grabbing
people’s attention at the moment when they can take action, and ideally providing a
channel to complete the action.
Getting it right:
If you’re sending a reminder to complete an action, set your user up for
success. Think about when they are likely to receive your message and where they
will be. A/B test your hypotheses about the optimal time to reach out, and facilitate
that action step by including a direct link when possible.
If you are sending an alert that may raise concerns (e.g., account privacy or
security issue), share a concrete next step (e.g., verify this purchase, change your
password) and make it easy for the user to contact you with questions.

Caution!
Constant low balance or expenditure alerts can be a distraction that causes
people to tunnel on their finances. Give people control over when alerts are
triggered so they can set meaningful thresholds for their financial situations.

Design Principle #3: Interrupt the habit and redirect attention.

- Rather than asking people why they took a certain action, ask questions about the
process (“Walk me through the last time you made a deposit. What was the first
step you took? Where were you? What time of day was it? What did you do next?
Think about how to change these cues and the environment in which people take
action, rather than just persuading them to switch.
- People tend to believe it’s harder to switch to a new technology than it actually is.
Reduce the misperception by helping people navigate one-time administrative
hassles such as registration and account authentication. Having support available to
troubleshoot can help alleviate anxiety.
- People tend to reciprocate positive social gestures. In fact, we will often go out of
our way to return a small favor. Research suggests that while we’re especially
sensitive to this dynamic within established relationships, the impulse to reciprocate
still holds when we interact with complete strangers.
Design Principle #4: Incorporate the human element
We may not notice generic communications, but when it seems like someone put
extra effort into reaching out, or when we know that someone is waiting for our
reply, we’re more likely to pay attention and respond. Even if we don’t know the
sender personally, including visuals like a photograph or personal details can invoke
a response.

Getting it right:
Include personal greetings (“Hi, Sara”) and signatures (“James”) in customer
outreach, whether email, text message, or other formats.
Use a personal, casual style where appropriate and acceptable (authoritative
tone may be more appropriate in some instances, such as official notices).

Inspire trust and confidence

When people come across digital financial services, it can feel risky to trust a new
provider or a virtual process with no human touch points and no tangible paper trail.
The stakes are especially high when cash flows are tight. Any delays or errors in
processing can result in fees and penalties that may affect long-term economic
security. Each individual touch point, whether it a website visit, a log-in, or an email,
represents an opportunity to either reinforce or break feelings of trust and
confidence.
The challenge:
 People often look to others to inform their behavior, but in a virtual
environment, it’s harder to know what products and services peer groups are
using.
 While many digital financial services provide increased clarity and control for
their users, online processes may feel more opaque than services delivered in
person at a brick-and-mortar financial institution.
  People are concerned about the security and privacy of their data, but may
not know exactly what to look for to ensure security.
 A product’s look and feel sends subtle signals about who should use it, which
may not resonate with a consumer’s identity.
Warning signs:
 People spending very little time on your website
 Some interest in your product but low conversion rates
 Feedback from consumers that they’re “not sure if this is real” or “afraid it
might go under”

Design Principle #1: Show that others have chosen to trust you
People manage their finances in private, which makes it hard for people to see what
others are doing. This makes it especially important to provide clear signals of
quality. Show that others trust you and that it’s safe to follow suit by encouraging
word of mouth referrals, highlighting user reviews and press mentions, and
including visible indicators of usage when they are likely to send a message of
growth (count of users logging in, saving money, etc.).
Getting it right:
If your user base is small because you’re just starting out, tell a compelling
story of growth or highlight individual users’ stories. This is also an opportunity to
use a “dynamic” norm to tell a story of growth (“Americans are starting to invest
more in their retirement…”).
Ask users to help you spread the word. Even if they love your product, it may
not occur to them unless you ask, and they may not follow through unless you make
it easy for them. Give them links to forward or key search terms to talk about.
Caution!
Don’t share anonymous reviews—they strip out the social aspect of this type
of information and can create distrust. If possible, share select information about
the reviewer, such as a first name or hometown so readers can personally relate to
them.
Visible social norms can backfire when they reveal low uptake or
engagement. Empty comment boards or outdated reviews send an undesirable
message about what others are doing.
Be careful about referencing social groups that the user might not identify
with. For example, featuring a Wall Street Journal article on a website may appeal to
some user bases but not others.

Design Principle #2: Give transparency to the process.

Sharing tangible cues about high-level processes prompts users to think about and
appreciate the effort that goes into a service. As a result, they tend to value the
service more highly, be more trusting and patient, and feel more satisfied with the
user experience. Helping users imagine or check the system’s progress on key steps
in a new or unfamiliar process can also increase confidence in expected outcomes.
This can be especially important for consumers who are new to digital channels,
those who have low initial trust in providers, and low- or middle-income consumers
who can’t afford to have delays or mistakes in their finances.