Information on the likelihood of future ‘financial shocks’ is a key savings motivator for consumers
The Competition and Consumer Protection Commission (CCPC) launched findings from its successful behavioural research trial on consumer saving habits on Tuesday. The research was carried out in response to an identified need to encourage shortterm saving habits among Irish consumers to increase financial resilience against unexpected financial shocks.
Designed and analysed by the Economic and Social Research Institute (ESRI)’s Behavioural Research Unit and facilitated by Bank of Ireland in a research trial with real consumers, the findings clearly show a positive increase in savings behaviours when behavioural insights are incorporated into savings product design and marketing materials. The CCPC has used the findings to develop a guide for financial providers on how they can encourage short-term saving habits and improve the financial well-being of their customers.
This behavioural study represents the first trial of its kind in Ireland and one of the first in Europe. Developed as a large-scale randomised controlled trial (RCT) with real consumers, the study examined the effects of behavioural science interventions on whether consumers open a savings account and engage in precautionary saving. The results of the behavioural research demonstrated how altering savings application forms with ‘pledge tools’, interactive calculators and using infographics about financial shocks can support consumers in developing positive short-term savings habits, which is an important part of financial well-being.
The research shows that by applying behavioural science to customer communications and the design of application forms, a financial provider can increase the uptake of savings accounts by over 25%.
Future ‘ financial shocks’ shown as key savings motivator
As part of the research, customers were sent marketing emails with consumer-friendly infographics that illustrated financial shock statistics, for example, ‘ 6 in 10 people face an unexpected expense each year’. Customers who received these emails were 20% more likely to open a savings account than those who received standard marketing materials. The study’s financial shock emails and digital ads saw a “click-through” rate increase of almost 10%.
SAVINGS BUFFER
Additional evidence-based findings showed that the majority of customers decide to use optional interactive calculators to calculate their total savings target, the date they wanted to reach their goal and how much they wanted to save each month. While reframing ‘rainy day fund’ messaging to ‘ unexpected expenses’ in the behaviourally-informed savings account application form, positively influenced consumer behaviour when setting specific savings goals.
Also, flexible commitments through ‘pledge tools’ offered customers the chance to make pre-commitments to withdraw only for specific reasons (e.g. a car breakdown), with trial participants who opened a savings account over 2.5 times more likely to have used the optional pledge tool than those who started the application, but didn’t complete it.
Jeremy Godfrey, Chairperson of the CCPC said: “Every year, most people face at least one unexpected financial shock – such as the need to spend money on repairing their car or their boiler. Building up savings as a buffer against the unexpected is important for financial well-being but many people who could save for the unexpected don’t do so.
This ground-breaking research conducted by the ESRI, Bank of Ireland and the CCPC has shown that many more customers will choose to save for the unexpected if financial institutions
use behavioural insights to design their marketing materials and their application process. We encourage other financial institutions to make use of this research so that more Irish con
sumers can weather financial shocks without going into debt.”
Visit ccpc.ie for more information on financial education, information, online tools and supports.