As banks shift from a transaction-centric relationship with their customers to one focused on lifetime value and financial well-being, how we approach digital design and context will become increasingly important.
Keeping financial goals visible on a mobile app can help customers remember and recall them, thereby serving as an anchor to influence savings and spending decisions. Similarly, graphic and visual content can be used to simplify complex concepts and aid comprehension, while intelligent space organization can contribute to clarity and clear representation of product features. Properly representing a client’s current financial situation can also counter the ostrich effect, or our natural tendency to ignore an obvious negative situation.
But we have to recognize, digital design can just as easily lead people to make poor, costly decisions. Recently, online brokerage Robinhood attracted scrutiny and criticism for encouraging risky investing behavior through design psychology. Robinhood’s trading app blasted users with digital confetti to celebrate transactions, uses technicolor interfaces to attract younger investors, and displays ‘People Also Bought’ recommendations to nudge users to buy stocks.
Banks must be clear about the problem they are trying to solve. Managers and leaders must be tasked with understanding the potency of these tools, and rigorous evaluation must be a critical component.
As banking decisions are increasing being made on digital screens instead of in-person, banks must start to account for the digital environment or context in which people are asked to take action or make a decision. Banks must also address how to ensure behaviorally informed design can create positive outcomes for the organization without harming the consumer.
Behavioral economists have long observed, when it comes to decision-making, we are more like Homer Simpson than Mr. Spock. We are not the hyper-rational Vulcan who absorbs information quickly and instantly grasps its meaning and implications. Rather, we are prone to imperfect and even irrational decisions, and the decisions we make are greatly influenced by the context within which we find ourselves.
In a recent experiment involving about 2,000 existing customers, a leading bank found 80 percent of single-service customers voluntarily signed up for savings, credit cards or other products when the bank represented these options as pieces in a jigsaw puzzle on their sign-in landing page. The bank had also added an interactive discovery tool to encourage these customers to explore other bank offerings.
Similarly, in the paper, “Save(d) by Design,” researchers describe how simple changes to context can encourage people to choose one 401(k) enrollment option over another. When the researchers used approachable language like “Do It Myself” instead of “I want to enroll with different choices,” and recolored select buttons in green, yellow and red to distinguish them, they saw an increase in the number of people who wanted to personalize their 401(k) enrollment settings instead of going with the default option.
Context can make the decision-making process intuitive, seamless and satisfying, just as easily as it can make it onerous, confusing and difficult.
During the pandemic, a large bank discovered its online account opening process had abandonment rates well above 80 percent. The multistep process, which took 10 minutes to complete, was simply too tedious and mentally taxing. We must remember, a person walking into a branch has just spent 15 to 20 minutes getting there. A digital visitor, by comparison, has not made that commitment and will be more inclined to bolt at the first sign of friction.
An insurance provider, confronted with a similar problem, was able to increase conversion rates on its digital channel simply by reducing the number of product and pricing options it presented to the digital visitor. Previously, this insurer was presenting prospects with too many options leading to decision paralysis.
Digital transformation is not just about making services available digitally, offering contact-free banking or establishing remote selling. Increasingly, banks will have to leverage advanced technologies like machine-learning, real-time data and behavioral science to create dynamic, personalized digital environments that can facilitate good decisions.
Delivering these optimized environments will require a move away from the traditional transaction-silo approach and toward an orchestrated effort based on closer observation of customer behaviors and more empathetic understanding of their needs. Banks can build a stronger foundation for greater profitability by connecting more meaningfully with customers, and digital design can help.
Wei Ke, Ph.D is a managing partner and Leo D’Acierno is a senior advisor at pricing, marketing and sales consultancy Simon-Kucher & Partners.
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