Cracking the Code on Behavioral Science: How Digital Banking Is Transforming People’s LivesMark Cliffe, Group Chief Economist ING Bank N.V.

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Mark Cliffe, ING Group Chief Economist Financial Brand Forum, Las Vegas15-17th April 2019

Follow me @MarkCliffe

eMail mark.cliffe@ing.comWebsite www.markcliffe.com

Cracking the Code on Behavioral ScienceHow Digital Banking Is Transforming People’s Lives

1. Get to know your customers

2. We can fight back against Big Tech

3. It’s not just about moving money!

Digital banking can change our lives

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4

Empowering people to stay a step ahead in

life and business

Smarter Decision Making = Realising Goals

Helping consumers improve their wellbeingby understanding their needs…

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5

55% of people don’t have clear financial goals

Challenge – many people don’t have financial goals!Empowering people isn’t just about providing information…

45%

37%

31%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

I have clear financialgoals

I have clear personalgoals

I have clearprofessional goals

I do not have any clearfinancial, personal or

professional goals

Source: ING, Motivaction

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“Shall I rent or buy?”

“How is the market doing?

“How secure is my job?” Where do prices of luxury homes go up – and where are they

cheaper?

“Why are so many houses on sale in my street?”

“Shall I eat in or out?”

“Shall I look for another job?”“How does inflation affect

my savings?”

“How much do I need to save for my pension?”

“How much do people like me spend?” “How much more do I

need to earn to be rich?

“Should I join a carpooling scheme?”

“Will house-prices go up?”

“Shall I buy a house close to my job?”

“Shall I look for financial advice?”

“Is university worth the time and money?”

“Is it wise to by a pink car?”“Can I retire at the age stated in my pension plan?”

“Shall I start my own business?”

“Does that guy earn enough to buy that apartment?”

How does all thisaffect my life?

1 Decisions, decisions…money is never very far away

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1 Life is complicated - influences on decision making

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EMOTIONAL

FUNCTIONAL

SOCIAL

ASPIRATIONAL

CULTURESelf Driven

NEEDS

FINANCIALTRANSACTIONAL DATA

Better Goals

FutureWellbeing

Society Driven

NEEDS

Hard data + Soft data = Holistic view

SmarterDecisions

1 A holistic view of consumers combines data science with social science - One provider’s transactional data is not enough…

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How much risk will she take?

1 Rich Dad, Poor Dad – consumers’ behaviour reflects their social context

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Info

Knowledge

Data

WisdomSignalCausation/Why

Right AnswersUnderstanding

Right QuestionsJudgement

Noise‘Data Exhaust’

1 From Data to Wisdom…

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1 Decisions need a view on the (sometimes distant) future……and reflect our past

Spending & Saving

Shopping

Social

Services &

subscriptions

Search

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2 How can financial institutions compete with Big Tech platforms?

Apple

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2 Techlash – privacy worries are an opportunity for financial institutions

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2 Mobile Living…People spend over 3 hours a day on their phones

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Source: comScore

Share of Mobile App Category Time Spent

People are much more engaged with:

• social networking• music• videos• games…

Banking?

2 “Gone in 60 seconds” – banking providers need to grow their ‘mindshare’…

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From 200

friends…

Friends of friends of friends200x200x200=

8 Million

Friends of friends…

200x200= 40000

2 The power of Network effectsThe law of three degrees of influence at play

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Go Viral!

Daily engagement

Data generative

Attracting Partners

Holistic Profiling

Personalised forecasting

Smarter Decisions

Developing Wisdom

Love Brand

Building from efficient execution at moments of truth to: *emotional attachment *higher frequency engagement *social sharing

2 ‘Viral Spiral’: from user experience (“it works”) to engagement (“I love it!”)

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People make mistakes on…

Ø numbers

Ø the future

Ø risk

Ø following others

2 Why people make bad decisions about money

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$234,000

2 “Let’s have a baby”Big decisions can lead to many others, big and small…

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78%of Americans using Mobile Banking

think it has helped them to manage their money.

Source: ING International Survey on Mobile Banking (2016)

2 Mobile Banking is already helping

The ‘A’ list of the future of mobile banking:

AdviceAccessAffectiveAssociativeAgileAmbient

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3 How mobiles could transform our financial lives

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3.1 Advice

Find your best deal!

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3.1 Going beyond the transactional – mobiles as virtual digital advisors

45% of Americans would like banks

to offer advice via their smartphone

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Source: ING International Survey on Mobile Banking (2016)

3.1 There is a big appetite for Financial Advice…

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Help decisions by entertaining, not training…

Real time, fun content - as decisions are being made…

3.1 “Wow” factor – pro-actively provide tips…news, advice, games to help people make better decisions

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See your money in full!

3.2 Access

Aggregation - conveniently combining

your financial data from all providers

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Source: https://www.yolt.com/

3.2 Open banking - a full view of your money

Access – linking to multiple platforms to

manage, and spend, your money

- managing and securing your financial data

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Platform of platforms…

3.2 Providing secure access other platforms

Source: Wikipedia (otherwise Shutterstock)

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Pre Search and Saving

What’s my goal?

What to buy?

How much?

Where from?

How to pay?

How do I feel?

What do others think?

Purchase Spend and Pay

Post Consume and Review

Where shall I shop?

How much to pay?

Is it a good deal?

How to pay?

Is it fun?

What do others think?

Long term cost?

Is the buzz fading?

Will others enjoy it?

Should I sell it or give it away?

Or buy more?

What do others think?

3.2 The Spending Journey Much more than making a payment…linked to many decisions and emotions

3.3 Affective

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You’ll love this!

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Money: a store of “frozen dreams”

3.3 Money is emotional It’s a means to an end – ultimately it’s about spending, not finance

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3.3 Emotions may lead us astray…

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• Applying behavioural economics insights with

machine learning...

• Voice

• Video

• Bio-metric sensors

• Geo-location and time data (Where and when)

3.3 Affective Computing – Emotional AI adapting to your moods

3.4 Associative

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Your pals like this!

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3.4 Money is social Decisions are often influenced by others – family, friends, media…

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“In my house I’m the boss, my wife is just the decision maker” Woody Allen

3.4 Women lead in most financial decisions…

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3.4 “People like me”: attractive peer comparisons Learning from user generated content and data

BankShop

Other Banks Builder

Insurer

Friends Interest Groups

Relatives

Work Colleagues

Social Network

Household

3.4 Individuals have increasingly complex networks……banking providers are is falling behind in the race for attention

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Bank

3.4 Financial institutions still treat as isolated individuals

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Customerdatabase

Wine lovers

Carafficionados

Wine LoversPassionatehome owners

Avid travellers

3.4 Think of consumers not as individuals but as community members…

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3.4 Financial institutions as facilitators of collaborative consumption?

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3.5 Agile

Hot news for you!

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We need help to make long term as well as short term decisions…

…forecasting is fallible, but essential…

3.5 Money is timeSome mortgages last longer than marriages…

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3.5 Doctor vs Taxi driver

Income

2019 2059

Driverless cars

Doctor

Taxi driver

Taxi driver (with driverless cars)

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Relationships depend on:

Frequency of contact (times x duration) AND

Quality of contact (relevance, interest, emotional engagement)

People want transactions to be quick and easy –

but engagement requires engaging, personalised and contextual insights and content

3.5 From “moments of truth” to “constant delight” Shift from transactions to experiences and long term relationship building…

3.6 Ambient

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Cloud Adviser!

• Future digital advisors will give

advice proactively….

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3.6 Going beyond mobile - voice driven advice

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3.6 From advisor to butler to guardian…

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3.6 Internet of Things – devices making smart decisions for you

1. People make bad decisions about money- money is emotion, social and time

2. We can fight back against Big Tech platforms

- use ‘network effects’ to trigger exponential client growth

3. Digital interactions need to move beyond the purely transactional

- with explosive growth in data, behavioural analysis and content

Cracking the Code of Behavioral Science Digital banking can transform people’s lives and help them make smarter decisions

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