Behavioural economics: encouraging savings and collections responses. Antony Elliott OBE, FCIB

Transcription

1 Behavioural economics: encouraging savings and collections responses Antony Elliott OBE, FCIB

2 Today s agenda How to influence financial well-being Savings credit unions building good habits Collections motivating good responses

3 Current Financial Well-being - How to get it

4 Current Financial Well-being - How to get it Plan for paying down debts Less unsecured borrowing Think it s less than average Managing Credit Reducing credit card balance and payment method I hate to borrow, I would much rather save up in advance

5 Current Financial Well-being - How to get it Frequency Number of types save for (expected and unexpected) Active Saving

6 Change the Situation Reflective System Controlled Effortful Rule-based Slow Conscious Rational Automatic System Uncontrolled Effortless Associative Fast Unconscious Affective

7 Change the Situation It turns out that the environmental effects on behaviour are a lot stronger than most people expect Daniel Kahneman Nobel Laureate

8 Change the Situation Schiphol Airport Lake Shore Drive in Chicago Image of black fly etched onto urinals led to spillage declining by >80% 36% fewer crashes in the 6 months after the lines were painted

9 Change the Situation 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

10 MINDSPACE * Messenger Incentives Norms Defaults Saliency Priming Affect Commitment Ego * Dolan et al (2012). Influencing behaviour: The MINDSPACE way. Journal of Economic Psychology, 33,

11 11

12 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

13 SAVE AS YOU BORROW: THREE-STEP APPROACH

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

15 Reasons given for finding SAYB helpful

16 BEFORE AND AFTER

17 Before and after compared with income groups

18 Savings habits: how has SAYB helped?

19 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

20 Original wording The balance of 224 is due for repayment. Payment may be made by card securely online at or by telephone on 0844 XXX XXX or 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.

21 Simplified Wording/Tick List Dear [NAME] Reference Number: [REF] Our Client: [CLIENT - PRODUCT] Password: [PASSWORD] Amount Due: [O/S BAL] Client Reference Number: [CLIENT REF] 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 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 Yours sincerely

22 Response rate improvement of: 2%!

23 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

24 Response rate improvement of: 23% to 57%

25 Promises to pay improvement of: 25% to 102%

26 Contact us when you want to know more:

27 Thank You