Banks can utilize behavioral science to enhance consumer experience:
There’s a common misconception that financial literacy is enough to improve wellbeing. While awareness, knowledge and skills are certainly necessary to help individuals make better financial decisions, they are not sufficient to enhance overall financial wellness.
Financial wellbeing and financially related stress both stem from internal factors, meaning that improving these must ultimately necessitate a change in behaviour and the development of healthy behavioural patterns.
If we look at the worlds of health and fitness in particular, what makes apps like Strava so engaging is that they manage to bridge the intention-action gap and keep users emotionally motivated to achieve goals and build healthier habits.
This intention-action gap is a problem that needs to be addressed in the world of personal finance. The majority of consumers are well aware of the importance of saving money, yet only a small minority are actually satisfied with their own savings.
When designing their own digital experiences, banks first need to understand the mechanisms that are causing this intention-action gap and then use this understanding when designing products to help customers close this gap.
This is where behavioural science becomes vital.
One of the many learnings from behavioural science is that human beings make irrational decisions, especially in the context of financial decision-making, and that people have a very strong emotional connection to money and finances.
In this sense, intrinsic motivation is very much a vital component of effective engagement banking. What we have learned from decades of scientific research is that goals that are linked to an internal motivation, such as inner values, needs and desires, are much more likely to be achieved.
By helping customers associate positive emotions with their financial goals, for instance, banks will be able to activate their customers’ intrinsic motivation and achieve long-lasting emotional engagement.
Another insight drawn from cognitive science is the concept of instant gratification bias, which is the tendency to favour immediate rewards at the expense of long-term goals.
Banks can leverage this knowledge of instant gratification bias to make savings tasks more rewarding and thereby strengthen this behaviour going forward. For example, banks can provide instant positive feedback to saving actions, design goal-based experiences that are linked to internal motivation or allow customers to visualise the financial progress they’re making, to immediately turn the process of saving money into a fun, enjoyable and rewarding experience. (Söderqvist, 2022, paras. 12, 13, 15-20, 24-27)
One of my first thoughts for what could help improve personal financial and wellness was education. This article argues it’ll take more than that, and instead, poses that a change in behavior is necessary. As a designer, this puts my solution closer to a system that encourages people to grow over time, rather than a platform that teaches financial literacy.
To achieve this, I can implement behavioral science into banking through methods like intrinsic motivation. If someone’s goals are more likely to be met when they are linked to a motivation, how can I associate positive emotions with their financial goals? Would this be opening their network to connections they are emotionally attached to, or creating fun experiences to assist in their financial decisions?
From this article, I gathered that people may want to improve their savings, but won’t act on it. How can designers close the intention-action gap to get customers to take this first step, but then also stay on the path?
References
Söderqvist, S. (2022, January 10). Why the key to effective engagement banking lies in behavioural science. Fintech Futures. https://www.fintechfutures.com/2022/01/why-the-key-to-effective-engagement-banking-lies-in-behavioural-science/
