Building financial health with digital financial services
Today, there’s a digital tool for almost every aspect of financial management, from automated savings and investment to expense tracking to person-to-person payments. Compared with traditional brick-and-mortar financial services, digital financial services can offer greater accessibility and convenience at lower prices. Features such as real-time notifications and automated transfers can help people avoid fees and stay on track with critical goals such as paying down debt and saving for the future. The combination of convenience, affordability, and functionality that digital financial services offer can support greater financial health.
Many people aren’t using helpful digital financial tools
The number of people using digital financial services is growing, but take-up is far from universal across different kinds of services and income levels. For example, while over 70% of banking customers in the United States use online banking, only 38% use mobile banking apps. In addition, some mobile payments, like bill pay, are popular, but nearly half of respondents to a 2016 Pew survey had never heard of using mobile phones to send or receive money to other people. At lower levels of income, the use of mobile phones and smartphones generally decreases, reducing access to digital products. This gap in engagement can lead to missed opportunities for building financial health – especially for low- and middle-income consumers and those whose needs may not be fully met by traditional financial products.
Understanding behavior can illuminate causes of low take-up and use
Regardless of the benefits of digital services, there are many subtle obstacles to transitioning financial lives into the digital world. For instance, it can be difficult to keep digital financial tools top-of-mind because there aren’t many physical cues for using them. People may lack confidence in a completely virtual financial transaction with no tangible paper trail, and new providers may struggle to build trust without that human interaction. The seemingly unlimited set of complex options in an app store can be intimidating to navigate with little or no support. Finally, the hassle of setting up financial profiles, managing user names and passwords, and linking external accounts can derail onboarding and cause people to give up. But understanding these behavioral obstacles and clients’ needs can pave the way toward designing solutions that overcome them.
A behavioral perspective
This playbook is a guide for financial service providers to use behavioral design to increase engagement with digital tools. All of the strategies are rooted in behavioral science—the study of how people act and make decisions in the real world. It outlines design principles for common barriers to adoption that take into account how people process information, make decisions, and take action. By incorporating this behavioral perspective, providers of digital financial services can build (or improve) products and services that reach more consumers and help them achieve financial health.
To optimize an existing product or service, see the full checklist on B-Hub or download as a PDF.
Understanding the challenges your users face
To identify the challenges your users struggle with most, you’ll need a deep understanding of the situations and external constraints they typically face. A mix of qualitative and quantitative research methods can help you gain insight and test your assumptions about your users.
Qualitative Research Methods: Understand your users’ behaviors, beliefs, opinions, emotions, relationships, and context
- One-on-one user interviews are a good starting point for deep learning about barriers. You’ll learn most by asking “how” questions, talking through specific past experiences, and asking about the process. Asking “why” questions requires users to understand and explain their own behavior (which we all struggle to do).
- Direct observation can help you map out the sequence of events, understand how actions are completed, and see how consumers react within an environment. Tools like Fullstory and Swrve can help you identify actual points of drop off and engagement in a digital environment.
- Surveys and questionnaires can help you gather data when administrative data isn’t sufficient to paint a full picture.
- Putting yourself in the user’s shoes and trying out elements of a product or service on your own can help you get a better sense of where they’re encountering hang-ups.
For a detailed guide on conducting in-depth interviews and observations, see Qualitative Research Methods: A Data Collector’s Field Guide from FHI 360.
For an overview of how to approach questionnaires, see Survey Fundamentals: A Guide to Designing and Implementing Surveys from the University of Wisconsin.
For a sample of validated questions, see this Tip Sheet on Question Wording from the Harvard University Program on Survey Research.
To learn more about the limitations of these techniques, see Do people mean what they say? from behavioral economists Marianne Bertrand and Sendhil Mullainathan.
For an organized opportunity to experience firsthand the challenges and opportunities in accessing financial services, see FinX from the Center for Financial Services Innovation (CFSI).
Quantitative Research Methods: Understand drop-off points and measure impact
- Administrative data from existing systems are often underused but can offer quick insights and help you identify patterns of use and critical drop-off points.
- Randomized Controlled Trials (RCTs) are simple experiments that can accurately measure the impact of products and services.
- A/B tests, a type of Randomized Controlled Trial, measure and compare the effectiveness of different versions of a program feature, service, or communication.
For a comprehensive guide to running Randomized Controlled Trials (RCTs), see Evaluating Financial Products and Services in the US from Innovations for Poverty Action (IPA).
For a guide to A/B testing, see the A/B Testing Tool from ideas42.
Secondary Research: Read about what other researchers and practitioners are learning in the field
Tests for accessibility standards: Tools and guidelines to help ensure content is accessible to people with disabilities
- The Behavioral Evidence Hub compiles innovative solutions from behavioral science that have been proven to amplify the impact of programs, products, and services.
- The Federal Reserve Board conducts an annual survey, Consumers and Mobile Financial Services, tracking trends in the adoption and use of use of mobile financial services
- The FDIC fields a national survey of unbanked and underbanked households and has conducted qualitative research on economic inclusion and mobile financial services
- Catalyzing Inclusion: Financial Technology & The Underserved, a report by the Center for Community Capital at the University of North Carolina at Chapel Hill, explores the potential for technology innovation to increase the financial health and inclusion of American households
- The U.S. Financial Diaries tracked 235 low- and moderate-income households over the course of a year. The detailed financial data collected through this study sheds light on common issues such as income volatility, financial planning and budgeting, credit challenges, perceptions about financial providers and products, and community dynamics.
- In Weathering Volatility: Big Data on the Financial Ups and Downs of U.S. Individuals, the JPMorgan Chase Institute analyzes detailed transaction data to determine how income and consumption fluctuate on a monthly and a yearly basis.
Putting your users’ interests first
There is no “neutral” pathway when it comes to design – the way that we design programs, products and services will impact behavior. As you optimize your products and services for adoption, consider applying this regret test from Nir Eyal, author of Hooked: How to Build Habit-Forming Products:
“If people knew everything the product designer knows, would they still execute the intended behavior? Are they likely to regret doing this?”
For example, many people will never bother to change a default setting such as automatic subscription renewals, even if they don’t want the subscription to renew. If your users were prompted to make an active choice, would they still be happy with the option you set as the default? Would they see you as a provider who’s on their side?
In an age when users can abandon your service or switch to another provider with one touch or swipe, a genuine dedication to the financial health of your users will differentiate your company and support long-term sustainability.
ideas42 would like to thank JPMorgan Chase & Co. for their generous support of this project. We are also grateful for the time and support of the many organizations that shared their insights or served as examples in this playbook: Alliant Credit Union, Aspiration, Bank of America, BFA (Bankable Frontier Associates), Catalyst Miami, Center for Financial Services Innovation, Digit, EARN, EverSafe, Flourish Savings, FS Card Inc., JPMorgan Chase & Co., Kinecta Credit Union, Latino Community Credit Union, LendingClub, National Urban League, Neighborhood Trust Financial Partners, Policygenius, Propel, Prosperity Now, Texas Tech University, UNC Center for Community Capital, and UnidosUS.
The views and opinions expressed in the report are those of the authors and do not necessarily reflect the views and opinions of JPMorgan Chase & Co. or its affiliates.