There is an increasing focus on ensuring customers make timely and informed decisions to drive responsible choices. When designing communications, banks can use insights from Behavioural Science to understand how their customers interact with messages, interpret them, and use them to make decisions. These insights can then be used to create communications which consider customers’ biases, emotions, and heuristics (decision-making shortcuts) – mitigating the risk of suboptimal outcomes.
When receiving a communication from their bank – whether in the form of a letter, telephone call, or mobile notification – consumers must first interpret the message, and then use it to decide how to respond.
Insights from Behavioural Science that draw on psychology, economics, and other social sciences tell us that interpretation and decision-making are heavily influenced by context. Therefore, whilst consumers intend to act in a way that aligns with their best interests, sometimes even their best intentions don’t lead to good choices.1
Understanding these systematic ways of making decisions (which are not always conscious) provides the opportunity to tailor communications to ensure the consumer makes decisions which are more likely to lead to good outcomes. It is important to highlight that the way the information is presented should not limit any options or compel the consumer to make decisions they don’t want to make.2
HOW TO TAILOR COMMUNICATIONS USING BEHAVIOURAL INSIGHTS
Changing the structure of a communication to ‘nudge’ a customer towards a decision does not always require a complete re-write and can be applied using subtle tweaks to how a message is worded or framed by making it more salient.3
Factors such as visual design, colour, size, and placement can impact how customers pay attention to pieces of information. Optimising the layout of digital or printed communications to emphasise the key messages can assist customers who skim-read. It is important to highlight and simplify the call to action to increase the likelihood that customers will act. SwissRe boosted sales by 180% in a recent direct mail campaign by emphasizing the delivery method and incorporating a clear call to action.4
The way the message is framed is important. Clearly highlighting the costs and benefits of action or non-action can aid customers to weigh these up and come to an informed decision faster. Positioning a message more positively or negatively can influence how customers perceive risks and rewards, as behavioural insights show that we have an aversion to potential losses.5
Insurance companies, for example. can utilise customers’ desire to avoid losses by highlighting the potential costly outcomes that could occur as a result of not purchasing insurance, rather than the small payments required for coverage.6
The use of feedback, social proof, and authority in messages can be used to evoke trust, concern, and a feeling of a herd mentality, which impact how a customer reacts. Monzo utilised these insights successfully when they first launched, as customers had to join a waiting list or be invited to open an account.7 This scarcity indicated that the product was popular, as so many people wanted an account, and encouraged others to join the waiting list to be like their peers. This strategy can be used more subtly through messaging which highlights how other customers have acted.
Additionally, behavioural insights describe how customers experience inertia when making decisions and prefer to endure negative consequences from omission (inaction) rather than those from commission (action).8 Presenting the customer with default choices reduces the effort required to make the decision and mitigates the customer’s inertia without restricting their freedom to choose.
The auto-enrolment mandate for UK pensions demonstrates how low opt-outs drive high participation, as customers are less likely to opt-out of auto-transfers into their savings or pensions accounts than to go through the effort of transferring money each month.9
BENEFITS OF THIS APPROACH TO COMMUNICATIONS
Integrating behavioural insights into a bank’s communication strategy can lead to increased customer engagement and trust. Understanding how customers think and behave can enable the creation of more engaging and relatable messages. Clear, jargon-free communication combined with transparency and empathy contributes to longer-lasting and trusting customer relationships and brand loyalty.
Behavioural Science also allows messages to be tailored to groups of customers who may interact with a communication differently. Financial institutions can make data-driven decisions based on customer segmentation to create customer-centric and personalized communications. Finally, as behavioural insights are scientifically driven, the impact of such changes is measurable and quantifiable. This allows banks to track the impact of their communication strategies, for example through engagement rates, and enables continuous improvement.
It is important to note that context matters, and behavioural interventions are not a one-size-fits-all solution. A change in wording or framing which might have a positive impact on the likelihood of customers reporting instances of fraud, for example, may not have the same effect when applied to encouraging customers to switch to a better savings rate.
Similarly, changes which are effective for one group of customers, or one type of communication, may not work elsewhere. Running pilot tests and testing changes is crucial in determining which nudges work and alleviating the possibility of any negative spillover effects. Financial institutions are responsible for ensuring that the use of behavioural principles in their communications is ethical and therefore leads to positive customer outcomes.
Capco’s Behavioural Science methodology identifies behavioural insights and designs tailored and ethical behavioural interventions that protect customers and ensure they have good outcomes. At Capco, we partner with our Financial Services & Energy clients to co-design and implement holistic Communication Strategies that meet both organisational and customer needs, founded on a deep understanding of decision making behaviours . To learn more, please contact us.
References
1 Ajzen, I. (1991). The Theory of Planned Behavior. Organizational Behavior and Human Decision Processes, 50, 179-211.
2 Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Yale University Press.
3 Watson, J. (2020, September 11). What is salience bias? Choice Hacking. https://www.choicehacking.com/2020/09/11/what-is-salience-bias/
4 Tamma, F. (n.d.). Behavioral economics: Understanding and influencing decision-making. Swiss Re. https://www.swissre.com/reinsurance/life-and-health/solutions/behavioural-economics.html
5 Kahneman, D., & Tversky, A. (1977). Prospect Theory. An Analysis of Decision Making Under Risk. doi:10.21236/ada045771
6 Pilat, D., & Krastev, S. (n.d.). Loss aversion. The Decision Lab. https://thedecisionlab.com/biases/loss-aversion
7 O'Connor, T. (2023, September 20). More than 200,000 join waiting list for Monzo investment platform. FT Adviser. https://www.ftadviser.com/investments/2023/09/20/more-than-200-000-join-waiting-list-for-monzo-investment-platform/
8 Mcguire, W. J. (1960). Cognitive consistency and attitude change. Journal of Abnormal and Social Psychology, 60(3), 345-353.
9 Robertson-Rose, L. (2019, October 30). Understanding default behaviour in workplace pensions: Automatic enrolment in the UK. Journal of Social Policy. https://www.cambridge.org/core/journals/journal-of-social-policy/article/abs/understanding-default-behaviour-in-workplace-pensions-automatic-enrolment-in-the-uk/0FF521D34BC932CAA89D9A8EE724C03A
