There has been a lot of interest in Nudge Theory over the last few years - but what does it mean in practice, and more importantly, how can it help promote financial wellness, and bolster Consumer Duty compliance for your business?
What is a nudge?
In a nutshell, nudges are interventions, which can be both large or small, aimed at getting people to act in their own best interest. It could be as simple as a sign placed near the door in an office to remind employees that turning off the light when they leave will reduce electricity consumption, or supermarkets influencing people to eat healthier by putting fruit and nuts beside checkouts instead of confectionery.
That said, nudges are at their most effective when personalised, relevant and timely, and that the individual maintains freedom of choice and feels in full control of the decisions they make.
Nudge Theory
As described by Imperial College London, ‘Nudge Theory is based upon the idea that by shaping the environment, also known as the choice architecture, one can influence the likelihood that one option is chosen over another by individuals.’
The concept was introduced by Richard Thaler and Cass Sunstein in their book: ‘Nudge: Improving Decisions about Health, Wealth, and Happiness’ in 2008 and was originally created to influence health indicators by inducing behavioural change (think 10,000 steps). Indeed, findings from an Imperial College London study estimated that health-related nudges were responsible for a 15.3% increase in healthier diet and nutritional choices.
Now apply that to the finance world, and you can see how nudges based on real-time insight could be a true game changer.
When we speak about nudges in a financial context, we are usually referring to specific messaging displayed to customers throughout their journey of product application or a product life cycle, to promote a positive action.
However, where the magic happens is when nudges are combined with rich, real-time financial insight about an individual customer, along with on-brand messaging to truly reflect your unique brand tone of voice - meaning as a business, you can proactively communicate with each customer in a hyper-personalised way to significantly influence positive behavioural change.
But the really clever new magic is when Moneyhub link these messages together!
Chained nudges and Consumer Duty
Moneyhub’s pioneering methodology of ‘chaining together’ nudges, encourages and then continues to respond to the natural progression of behavioural change, providing insight, support or useful education material at timely moments - a capability unique to Moneyhub. These ‘chains’, or journeys, mean that nudges are relevant and appropriate for each customer - relevant to their financial situation, their mindset, their relationship with their bank or provider, providing appropriate wording and encouragement at the right time - thus achieving ultra-high engagement and conversion.
Moneyhub creates these personalised nudges based on triggers from our market-leading, AI-powered decisioning engine. Data-powered nudges influence behavioural change even more effectively, by prompting timely, relevant actions when customers are most receptive. For example, a mortgage lender could simply nudge customers when their loan-to-value ratio passes a threshold. But imagine when the lender can proactively engage with a customer who isn’t quite eligible for a lower rate. Supporting them to make affordable over-payments so the customer at the end of the term now becomes eligible for the lower rate.
Data-driven insights made possible by Moneyhub’s AI-powered categorisation will ensure your business achieves higher engagement and conversion rates - in addition to being able to evidence Consumer Duty compliance.
Use cases
1. Detect and Intervene - Always-on optimised nudges, supporting & evidencing Consumer Duty for better outcomes
The Challenge
The new Consumer Duty meant that one of our large enterprise clients needed to accelerate its strategy to improve customers' financial situations, and implement a messaging framework that could Detect, Intervene and Report on customer outcomes.
The client’s existing messaging platform already provided communication to customers through product silos, but the challenge was to create an overarching messaging framework to analyse customer data holistically and intervene with personalised, chained nudges when vulnerability or a bad outcome was detected.
The Solution
Moneyhub implemented Detect and Interviene, Moneyhub’s always-on customer messaging approach, enabling timely, relevant and personalised nudges to encourage an alternative outcome based on customers' historic and current financial spending behaviours. Using holistic customer's data, mapped across the usage of all their financial products, our client is able to detect characteristics of vulnerability, and customers who are at risk of poor outcomes, going on to provide appropriate chained nudge interventions to continually recommend and encourage alternative actions for improved outcomes.
2. Detect, Intervene and Report. An evidence based approach to encouraging good outcomes
The Challenge
Another large enterprise client wanted to evaluate a specific customer segment under their Consumer Duty compliance activity, and was looking for a solution to quickly detect outcomes and fair value at a holistic customer level, and provide evidence of the interventions to the FCA and its own board.
The Solution
Moneyhub built a customer metric and detection framework, and decisioning model across multiple products for the customer segments in question. When run across the holistic customer data, the client could quantify situations, actions and customer behaviours thus enabling the detection and projection of consumers’ outcomes. They could also better identify if a customer was, or could in the future become, at risk of becoming vulnerable. In addition, the framework provides a Consumer Duty outcome report to evidence compliance, and an always-on messaging framework to continually nudge and encourage customers from good outcome to good outcome.
Ready to get started?
Get in touch to see how Moneyhub can help support and engage your customers with our Detect, Intervene and Report solutions using chained nudges to bolster and accelerate your Consumer Duty strategies in 2024 and beyond.