Nudging isn’t about forcing us to do things. It’s about how choices are framed and presented. We all know about those little decisions we’d prefer not to make, but we weaken. I’m partial to bags of kettle fries and admit that three times a week when presented with them, I weaken.
Over a year, $6 a week adds up to $312, which could buy me a couple of domestic flights, and some nice restaurant meals, or I could save it for something even better. If I received a tiny nudge every time I thought about buying a second or third bag of chips in a week, I might be able to make a better decision.
Banking Ombudsman Nicola Sladden quipped to the audience at the Te Ara Ahunga Ora Retirement Commission conference: “If you nudge me when I was going into McDonald’s for a hamburger, I’d find that kind of affronting.”
Frankly, I’d welcome my bank nudging me to resist in that same situation. It would be good for my health and my wealth.
Or these: “Hey Diana, you’ve just used up your clothing budget for the month/year.” Or “Hey Diana, you’ve underspent by $50 this month, press yes to add that to your high-interest savings account?” It might even encourage people who know they should spend more on themselves to have a treat.
Banks could tie their data to messaging when they detect vulnerability or customers at risk of poor outcomes and nudge them to take alternative actions. That isn’t going to overcome addictions such as gambling, but it could help.
Artificial intelligence means customers could tailor their own hyper-personalised nudges with a willing bank. Fintech-based challenger banks are champing at the bit to take on our mainstream banks when open banking allows. They will be able to use personalised, real-time insights embedded in the bank’s digital experience to give nudges. If they come out swinging with nudges that customers can control, they’ll fuel trust and loyalty.
In all fairness, the mainstream banks do have teams looking at nudge theory and soft interventions. BNZ general manager customer assist Martin King touched on it at the conference mentioned above. He said the bank looked at how to communicate with and nudge customers experiencing financial difficulty.
Likewise, Roz Clarke, general manager of customer outcomes at ASB, says the bank has built-in nudges around creating good saving habits, the ability to balance spending, and to effectively manage debt.
“We know from our research that they’re most powerful when they’re really specific, really actionable and really simple.”
The bank contacts high users of overdrafts to set up alerts, which are in effect nudges. “What we’ve seen from that sort of series of nudges is 71 per cent of customers who receive those nudges avoid going into overdraft in the following months.”
A cynic might say banks aren’t going to use nudges for good. People do need to be careful about anti-nudges. That’s advertisers, marketers, and fraudsters using nudge theory as a dark art for nefarious purposes rather than financial inclusion and social responsibility. Not everyone will like this soft paternalism approach. Some detractors question whether nudge theory is being used to curtail personal freedoms.
That same cynic might point out the banks already have the technology to do good things that they don’t do. An example is sweeping money automatically to and from savings if you’re about to overdraw your account, to avoid interest charges and fees.
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