How behavioural science can shape the future of digital banking

Georgina Woodley
Georgina Woodley

MD Australia & NZ

Traditionally, banks have acted as the facilitators of finance and transactions, resting on a solid footing of traditional values, trust, and history. These values were built at brick-and-mortar stores through personal relationships and brand loyalty that started when we were children. Fast forward to today, the digitalisation of retail banking means that customers can switch to a more appealing offer more efficiently than ever.

In the digital age, banks are striving to foster customer loyalty by creating value that can replace the in-person elements of banks’ value proposition of years passed. Part of this shift involves streamlining and unlocking data that can create engagement. Engagement is typically conceptualised as having two components: the extent of usage (e.g., frequency, duration) and the subjective experience (e.g., interest, appeal, and attention). When deployed effectively, behavioural science can help increase the stickiness of digital banking tools by strengthening consumers’ habitual use.

Here are four behavioural science principles that are proven to improve customer engagement with digital products.

Hyper personalisation and contextual banking

Successful digital banking products of the future will provide a contextualised banking experience tailored to individual users based on a variety of information like location, time of day, personal preferences, money habits, and behavioural patterns. Contextual banking is based on the behavioural science principle of Just-In-Time-Adaptive-Intervention (JITAI). It delivers pertinent information to customers where and when they need it based on data analytics and intelligent algorithms. For example, an app might send a notification based on the user’s location or the time of day based on their previous behaviours in those contexts.

Goal setting and behavioural monitoring

These are two of the most effective behaviour change techniques (BCTs) for digital tool creators. While it’s common for banks to include some elements of goal setting and behavioural monitoring within Personal Financial Management Tools, this will become increasingly common and sophisticated as part of the new world value that banks create for their customers. Goal setting is strongly linked to increasing motivation but also usage engagement by encouraging users to log in and continually check their progress. In the future, these BCTs will become far more personalised and targeted using open data frameworks. Banks are not yet ready to utilise all the data that is available to them, but many are testing and trying new things.

Gamification

Refers to the inclusion of game-like elements like point scoring, rewards, and rules in non-game contexts, to promote user engagement with products. In Australia, the CX-focused and digital-only brand Up leans heavily on gamification to encourage a positive emotional connection with customers. Their ‘Save Up 1000 Challenge’ combines gamification, goal setting, and behavioural self-monitoring in a robust and engaging offer.

Capacity building

Key trends in digital banking tend to support customers to self-manage their wealth and money. Therefore, retail banks will grow as agents of empowerment, helping individuals set financial goals (BCT: goal setting), track their progress towards them, and develop positive money habits and financial literacy. This will become a central element of banks’ offers, with new value created for the customer.

How to get started

The first step towards designing a behaviourally informed solution or feature is to define your behavioural challenge. We recommend that clients start with an understanding of the user’s job to be done (JTBD). This involves studying what customers are trying to accomplish rather than what they are saying they want, especially in areas with insufficient solutions, as these often make for great opportunities for innovation that gets to the heart of the job to be done.

“If I had asked people what they wanted, they would have said faster horses.” Henry Ford

JTBD is best reduced to its simplest parts while taking a zoomed-out view. Consider using a sentence framework that considers customers’ JTBD in terms of its verb, object, and context. The job to be done should focus on the end goal, not the task at hand.

“Save $60,000 for a house deposit in a rates driven market” rather than “open a new high interest saving account”

Prioritise opportunities to tackle those JTBD. While many opportunities can be available, it is essential to identify the highest value ones for your brand. What aligns most with your values and current product strengths?

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