Combining nudges and boosts to increase precautionary saving

• Description of the programme
• The study
• Key findings
• Points to consider

Description of the programme

The Competition and Consumer Protection Commission (CCPC) had identified a need to encourage short-term saving habits among Irish consumers to increase financial resilience against unexpected financial shocks.
The programme was designed and analysed by the Economic and Social Research Institute (ESRI)’s Behavioural Research Unit and facilitated by Bank of Ireland.

The programme used a combination of evidence-based behavioural nudges – altering the choice architecture to steer people in particular direction, and boosts - not attempting to direct decisions explicitly, but to improve people’s competence to make choices that align with their own goals.

The participants were consumers, either customers of the Bank of Ireland or people (who may or may not have been customers) who visited the bank’s website to fill out an online savings application form.

The trial ran for six months and involved over 160,000 customers who received an email from the Bank of Ireland and 993 customers who visited the website and opened a savings account.

The study

The study tested whether evidence-based behavioural interventions would encourage consumers to take out savings accounts and engage in precautionary short-term saving.

The intervention was in the form of two treatments: the first a combined nudge-and-boost consisting of multiple changes to a bank’s online saving account application form, including changes to the order in which questions were asked, an interactive calculator to boost understanding of savings accumulation and a pledge tool offering customers the chance to make pre-commitments to withdraw only for specific reasons (e.g. a car breakdown.)

The second was a communication designed to engage precautionary motivation to save, in the form of an animated email that highlighted the cumulative risk of financial shocks, with statistics such as “6 in 10 people face an unexpected expense each year”.

These treatments were tested in two six-month field trials, run concurrently. The first trial involved over 160,000 bank customers who were randomly sent one of four different combinations of communication and savings account application form. There was also a ‘no-contact’ control group.

The second trial was an ‘organic’ trial of people who had not been contacted but who found their way organically to the bank’s website and were randomly allocated to a version of the savings account application form, with or without the behavioural interventions.

It is worth noting that the paper includes a short summary of findings from a literature review of previous behavioural research around financial decision-making, and a short summary of an analysis of existing survey data.

Key findings

• Overall, the study showed that the financial shock communications and enhanced application forms with tools had a positive impact on saving behaviours.
• The behavioural interventions increased the uptake of savings accounts by 25-40%.
• The greatest benefit was among customers on lower incomes, who are most vulnerable to the negative effects of unexpected expenses and financial shocks.
• Customers who received the behavioural ‘financial shock’ emails were 20% more likely to open a savings account than those who received standard marketing materials.
• Customers who opened a savings account were 10% more likely to have used the optional interactive calculator than those who started a savings account application form but didn’t complete it.
• Reframing ‘rainy day fund’ messaging to ‘unexpected expenses’ in the behaviourally-informed savings account application form positively influenced consumer behaviour.
• Trial participants who opened a savings account were over 2.5 times more likely to have used the optional pledge tool than those who started the application but didn’t complete it.

Points to consider

• Methodological strengths/weaknesses: The study used a robust, large-scale RCT. The report discusses the method in detail and addresses limitations such as the fact that combining multiple behavioural interventions into a single treatment increases the likelihood of impact, but also makes it impossible to infer which interventions are responsible for any effects observed. The authors conclude that this is less important for financial institutions wanting to apply the learnings than it is for behavioural scientists wanting to understand the mechanism of the behaviour change.
  • Due to low response rates to the practitioner survey and low engagement with the evaluation by practitioners who attended network events, the findings may not reflect the full range of views of people who engaged with the pilot.
• Generalisability/ transferability: The study was amongst consumers in Ireland, but similar interventions are likely to be effective elsewhere.
• Relevance: Highly relevant as the ongoing increases in the cost of living make people even more vulnerable to financial shocks.
• Applicability: Of interest to financial institutions and anyone working with people on low incomes or with no savings and vulnerable to financial shocks.