Todays agenda How to influence financial well-being Savings credit - - PowerPoint PPT Presentation

Behavioural economics: encouraging savings and collections responses

Antony Elliott OBE, FCIB

• How to influence financial well-being
• Savings – credit unions building good habits
• Collections – motivating good responses

Today’s agenda

Current Financial Well-being - How to get it

Current Financial Well-being - How to get it

Managing Credit

Plan for paying down debts Less unsecured borrowing Think it’s less than average Reducing credit card balance and payment method “I hate to borrow, I would much rather save up in advance”

Current Financial Well-being - How to get it

Active Saving

Frequency

Number of types save for (expected and unexpected)

Change the Situation

• Controlled
• Effortful
• Rule-based
• Slow
• Conscious
• Rational

Reflective System

• Uncontrolled
• Effortless
• Associative
• Fast
• Unconscious
• Affective

Automatic System

It turns rns out that at the e envir environm

• nmen

ental al ef effec ects

• n beha

ehaviou iour are e a lot stronger nger than n mo most peo eople le exp expec ect

Daniel Kahneman Nobel Laureate

Change the Situation

Image of black fly etched

• nto urinals led to

‘spillage’ declining by >80% Change the Situation 36% fewer crashes in the 6 months after the lines were painted Schiphol Airport Lake Shore Drive in Chicago

• Mindspace report published

in March 2010

• Operating framework for

applying behavioural insight to public policy

• Behavioural Insights Team

established in the Prime Minister’s Office

Change the Situation

MINDSPACE*

Messenger Incentives Norms Defaults Saliency Priming Affect Commitment Ego

11

Report – “Save while you borrow: credit unions creating good habits”

• Report utilises result of 7 surveys with 2172 members
• Variety of credit unions (nationally and industry)
• Quantitative and qualitative results
• Quantification of “cost” to members

SAVE AS YOU BORROW: THREE-STEP APPROACH

How helpful is/was it to be saving at the same time as paying off your loan?

Reasons given for finding SAYB helpful

BEFORE AND AFTER

Before and after compared with income groups

Savings habits: how has SAYB helped?

Debt Collection Letters

• Original letter and eight variations tested
• Minimum of 4,000 per letter, over 32,000 in total
• Randomized sample
• Implemented in live environment

Original wording

The balance of £224 is due for repayment. Payment may be made by card securely online at www.xxx.co.uk

• r

by telephone

• n

0844 XXX XXX

• r

if your circumstances prevent you from doing this we require you to contact us to discuss a reasonable and realistic payment arrangement. If you are unsure how to settle this debt you should telephone one of our Collections Advisors who will discuss the options available to repay this amount and the payment methods available.

Simplified Wording/Tick List

Dear [NAME] Reference Number: [REF] Amount Due: £[O/S BAL] Our Client: [CLIENT - PRODUCT] Client Reference Number: [CLIENT REF] Password: [PASSWORD] Original Creditor Reference: [ORIG CRED REF] Intro para You can choose from the following actions. If you can afford to repay the outstanding balance, you can make a repayment by card: Online at www.xxx/payonline ✓ By phone on [TEAM TELEPHONE] ✓ If you are unsure what to do, wish to discuss a repayment arrangement, or would like to repay using another repayment method, you can: Call us on [TEAM TELEPHONE] ✓ Contact us at www.xxx.co.uk/contact ✓ Yours sincerely

Response rate improvement of:

2%!

Three interventions with seven combinations

• 1. Norm Surprise

Positive response from customers calling

• 2. Salient Contact

Information Remove payment info, making contact salient

• 3. Ego-orientated

Action Pointing out active choice not to respond

Response rate improvement of:

23% to 57%

Promises to pay improvement of:

25% to 102%

Antony.Elliott@fairbanking.org.uk Ivo.Vlaev@wbs.ac.uk 07850 304845

Contact us when you want to know more:

Thank You