Blending insights of psychology and economics into the design of a product may just be the key to improving financial health and addressing current impediments facing customers when it comes to managing payments. These points were discussed at the Improving Financial Health to Create Shared Value seminar on 30 August 2017. Organised by Shared Value Project members NAB and Good Shepherd Microfinance, the session provided valuable insights into creating shared value through a blended approach – understanding the economics of human behaviour and how an integrated solutions can redefine the consumer experience and solve social issues.
One such issue, according to Sian Williams, Director of Financial Health Exchange at Toynbee Hall in London, surrounds low-income earners in the UK, who more often than not, do not favour the use of direct debit.
Sian and her team are currently working to reverse this mindset. A platform that behaves as money mentors is in the works to help people learn about money management, understand the roles and effects advertising and marketing can do and how to get as much for as little as possible. The platform can change the way individuals view financial institutions and billing organisations by having greater control of their money.
This requires a re-education, and for there to be financial products in the market that address the issues faced by those with irregular cash flows. Sian highlighted that banks need to understand their customers and design products that look at their current needs as opposed to coming up with one that aims to achieve a specific gain.
Currently in the UK, works are underway to implement Request for Payment, which aims to deliver a payments solution and service complementary to existing ones for instances when payers may benefit from more flexibility in timing their bill payments. It offers payers a chance to build more knowledge and confidence in their finances by providing flexible payment options in instances when more rigid options could cause avoidable financial stress. The platform also allows different Billers a direct digital channel of communication to the payers potentially reducing cost of doing business and elevating customer service standards. This shift from traditional method of collection means that billing organisations can reinvest the debt collection into relationship building with customers.
Applying behavioural economics is key to designing a product that benefits customers’ financial health. Lessons from behavioural economics can be used to create environments or products that nudge people towards wiser decisions and healthier lives. Katy Davis, Managing Director of US behavioural science consultancy, ideas42 shared that an integrated solutions set, in which products are designed to help consumer will in turn help the banks by ensuring payments are made and managed well. According to Katy, shared value should be natural and organisations and banks should work out find areas of benefits where there are capacities for alignment.
There has also been a growing interest in blended product models that include features like teaching and coaching, tools and nudges. An example will be the Feedback Card that assists the user in managing their spending by budgeting through a combination of actions that tells the user how much to save or spend, in real time.
Adam Mooney, Chief Executive Officer of Good Shepherd Microfinance who was the facilitator at the session said that finding a common benefit is integral to what shared value represents. NAB for instance, has been leading the shared value movement through scale and impact. NAB also reinforced its commitment to continue in its shared value journey.
At an earlier conference Small Loans, Big Hearts, organised by Good Shepherd Microfinance that discussed on financial inclusion, NAB Chief Executive Officer Andrew Thorburn said that the partnership has been outstanding with almost 500,000 individuals reached thus far. He further added that NAB will continue to support Good Shepherd Microfinance to reach 100,000 people per year.