{"id":33595,"date":"2022-06-09T13:04:00","date_gmt":"2022-06-09T12:04:00","guid":{"rendered":"https:\/\/digileaders.com\/?p=33595"},"modified":"2023-07-19T13:34:50","modified_gmt":"2023-07-19T12:34:50","slug":"the-power-of-nudging-and-behavioural-science-in-the-finance-sector","status":"publish","type":"post","link":"https:\/\/digileaders.com\/the-power-of-nudging-and-behavioural-science-in-the-finance-sector\/","title":{"rendered":"The power of nudging and behavioural science in the finance sector"},"content":{"rendered":"<p style=\"text-align: left;\"><b>Nudging.<\/b><span style=\"font-weight: 400;\"> It\u2019s the latest evolution of a trend previously known under the catch-all buzzword <\/span><a href=\"https:\/\/en.wikipedia.org\/wiki\/Quantified_self\" target=\"_blank\" rel=\"noopener\"><b>Q<\/b><b><i>uantified self<\/i><\/b><\/a><b><i>.<\/i><\/b><i><span style=\"font-weight: 400;\">\u00a0<\/span><\/i><span style=\"font-weight: 400;\">Think fitness trackers, smart watches, baby health trackers and plenty of other wearables flooding the consumer market. Thanks to IoT <\/span><a href=\"https:\/\/en.wikipedia.org\/wiki\/Internet_of_things\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">(Internet of Things)<\/span><\/a><span style=\"font-weight: 400;\"> and the latest technological advancements, humanity has reached a point in evolution <\/span><a href=\"https:\/\/www.avenga.com\/magazine\/wearables-iot-healthcare\/#:~:text=IoT%20wearable%20devices%20are%20reshaping,and%20gain%20a%20competitive%20advantage.\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">where well-being and health are <\/span><\/a><span style=\"font-weight: 400;\">enhanced <\/span><span style=\"font-weight: 400;\">and, ideally, improved with the help of smart devices and apps.\u00a0\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3 style=\"text-align: left;\">How does nudging and behavioural science relate to the world of finance?\u00a0<span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">It\u2019s clear that nudges and tips from a sleep tracker can help consumers improve their sleep quality and that they can reap certain quantifiable health benefits in the mid\/long term.\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">If the financial sector seeks to tap the full potential of nudging, we first need to take a closer look at how nudging works. <\/span><span style=\"font-weight: 400;\">One of the most influential publications in the field of behavioural economics was written by economists Richard H. Thaler and Cass R. Sunstein.<\/span> <span style=\"font-weight: 400;\">Their book &#8216;Nudge&#8217;, written in 2008, dives deep into how rapid and instinctive behaviour vs. conscious and deliberate actions influence both humans <\/span><span style=\"font-weight: 400;\">and, on a larger scale, societies and governments as well.\u00a0\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">\u00a0\u00a0<\/span><\/p>\n<h3 style=\"text-align: left;\">Implementing nudging for sustainable banking<span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">Our wallets are powerful tools for climate action. Imagine you wake up in the morning and check your bank account over breakfast. As you sip at your coffee, you get a positive awareness boost from seeing that your online banking app shows a reduction of your CO<\/span><span style=\"font-weight: 400;\">2<\/span><span style=\"font-weight: 400;\"> impact. Just like your fitness tracker, your online banking app encourages you to steadily improve your climate fitness: fintechs such as Novus, the UK\u2019s first B Corp certified neobank, have embedded a nudging feature into their green banking products, thereby offering customers a whole new way of conscious consumption. The Novus banking app uses the ecolytiq software to provide their customers with personalised information on their carbon emissions. The integrated feedback loops help customers better understand their impact and contextualise personal sustainability data, with the goal of helping them reduce their overall environmental footprint.\u00a0 \u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">The nature of consumers is shifting \u2013 long gone are the days of a passive consumer base doing everything that brands and companies want them to do. The power of technology \u2013 not only fitness trackers, but also the huge amount of information available on the internet \u2013 have made possible the transformation of passive consumers towards enlightened prosumers taking more conscious purchasing decisions with the swipe <\/span><a href=\"https:\/\/ecolytiq.com\/green-credit-card\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">of their card<\/span><\/a><span style=\"font-weight: 400;\">. Decisions that \u2013 despite a more conscious way of spending \u2013 ultimately help reduce the environmental cost of their lifestyles.\u00a0\u00a0<\/span><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">The market potential for conscious consumption driven through banking is huge: According to a McKinsey estimate, the global revenue potential of impact accounts amounts to $50-60 billion. Hyper-personalised financial products that put sustainability at their core increase a <\/span><a href=\"https:\/\/ecolytiq.com\/blog-creating-sustainable-value-for-financial-services-providers\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">financial institution\u2019s value proposition<\/span><\/a><span style=\"font-weight: 400;\"> and thus render it a lot more attractive to today\u2019s sustainability-conscious consumers. According to Cone (2017), approx. 85% of GenZ and Millennials prefer to buy from companies that address social and environmental issues.\u00a0\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">Unlike older demographics, the younger generation is well-informed <\/span><a href=\"https:\/\/ecolytiq.com\/blog-climate-change-101\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">about climate change<\/span><\/a><span style=\"font-weight: 400;\"> since it will be the first generation that is directly hit by the effects of global warming.\u00a0\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<h3 style=\"text-align: left;\">The pitfalls of nudging in the world of green banking<span style=\"font-weight: 400;\">\u00a0<\/span><\/h3>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">Let\u2019s face the uncomfortable truth: <\/span><b>people don\u2019t like to be told what to do<\/b><span style=\"font-weight: 400;\">. \u201cStop eating meat! Become a vegan!\u201d won\u2019t do any good. Even less so if it appeared as a prompt in your online banking app. This is an example of the automatic system that Thaler\/Sunstein were referring to. There are better approaches for educating consumers towards more sustainable spending and, ultimately, conscious consumption.\u00a0\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">A method that will help banks to leverage behavioural economics through nudging people in their online banking can simultaneously incentivise sustainable spending.\u00a0\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">The secret power inherent to sustainability data-enriched online banking is that the content is a) hyper-personalised, b) leverages the well-known trend of the \u201cquantified self\u201d, as seen with fitness trackers and other IoT wearables.\u00a0\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">Sustainable banking is safe, easy to implement and, first and foremost, it meaningfully helps to <\/span><a href=\"https:\/\/ecolytiq.com\/ecoengage\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">engage consumers<\/span><\/a><span style=\"font-weight: 400;\"> through nudging\/promoting the conscious use of their money.<\/span><\/p>\n<hr \/>\n<p style=\"text-align: center;\"><span class=\"btn-container\"><a class=\"btn btn-md btn-primary\" href=\"https:\/\/digileaders.com\/topic\/emerging-tech\/\">Read More Emerging Tech <i class=\"far fa-caret-right\"><\/i><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nudging. It\u2019s the latest evolution of a trend previously known under the catch-all buzzword Quantified self.\u00a0Think fitness trackers, smart watches, baby health trackers and plenty of other wearables flooding the consumer market. Thanks to IoT (Internet of Things) and the latest technological advancements, humanity has [&hellip;]<\/p>\n","protected":false},"author":51,"featured_media":33596,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"class_list":["post-33595","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","topic-net-zero","topic-sustainability","topic-emerging-tech","topic-fintech"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The power of nudging and behavioural science in the finance sector | Digital Leaders<\/title>\n<meta name=\"description\" content=\"Nudging. 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