Contactless is killing savings

It’s time to introduce some pain into payments

The best new business propositions we develop hang off an unresolved tension between opposing needs or desires.  “I want a girlfriend but I can’t be bothered to leave my sofa” – hello Tinder.

In banking, customers have a pressing need to save money, but are constantly presented with easier ways to spend it. UK contactless transactions per month trebled in 2015. Yet customers tell us that contactless makes them feel out of control. They miss the time they had to hand over hard cash. But what’s the difference? It’s all money isn’t it?

Well, no. Contactless removes a ‘decision point’, where the customer has to stop and think about whether this is money they should save or spend. So how can you insert more ‘decision points’ in retail banking to help the customer save, without affecting convenience?  You could give customer electric shocks each time they’re faced with the temptation to spend money – that’s what first direct’s savezap does.

https://www.youtube.com/watch?v=CIxYUKzZwe8

Well it was a good April Fool’s gag…

But here are a few ways you might really approach it:

Split up big sums of money into smaller lumps which consumers can relate to. Or partitioning, in behavioural economics. This Wired article describes how, when people are obliged to open several smaller packets of crackers rather than eat from one large bag, they generally eat fewer crackers. They have to stop and think before they open each new bag. In banking, seeing the split of spend by category follows the same principle: tell someone they’ve spent all of the salary this month and they’ll most likely shrug. Tell them they have spent 25% of it improving their castle defences in Clash of Clans, and they are more likely to take a hard look at themselves in the mirror.

Make small sums seem as important as big sums. Yes, the old adage of ‘look after the pennies’ is very true. Fact is few people do it. Behavioural economics tells us we are less likely to save small amounts like a £10 scratchcard winning than bigger ticket items like a 10% end of year bonus. But that £10 is money which can be saved – the customer needs help to understand that. Like tracking daily progress towards a pre-established savings goal. That £10 might make all the difference to a daily goal.

Minimise the mental separation between purchase and payment. Credit cards separate the joy of a new purchase from the pain of having to remove money from your bank account – often causing horrors at the end of the month. The new move towards ‘predictive’ banking (as touted by Atom) is starting to tackle exactly that problem: showing you how spending behaviour today will affect your future balance (like the amount of interest you’ll earn).

Give customers a chance to think twice. Pension reform now gives customers the freedom to spend a proportion of their pension early. ‘Cooling-off periods’ are proven to reduce projection bias (the thing which convinces you ‘my future self will want this Ferrari just as much as I do now’). One of our clients, Standard Life, has introduced a 2-step process, whereby there is a week’s gap between the first call and completion of the withdrawal. In the interim, Standard Life can provide information on all of the implications of withdrawing, such as the impact on future income.

Try it. A little pain can sometimes be a good thing.

Market Gravity can help you turn an idea into a breakthrough proposition.

Get in touch with Andrew to find out how.

andrew.cowley@marketgravity.com

 


NEWS: Challenging the challengers

Market Gravity’s Paul Bowman shows banking industry how to act like a challenger.

The banking industry is facing a challenging time as established high street banks attempt to re-find their niche in the marketplace and keep up with today’s fast-moving digital trends. The new breed of challenger banks is turning banking on its head but Paul Bowman from Market Gravity believes big banks can also bring their offerings into the digital age by embracing new, disruptive technologies and changing their ways of working to think and act like a challenger.

Paul, partner and Edinburgh managing director at the proposition design consultancy, will present at the RFi Group Global Digital Banking Conference on Thursday 16th June along with Helen Page, propositions and marketing director at Clydesdale Bank and Yorkshire Bank. He will outline why a traditional long term strategy is no longer relevant and how organisations need to think in weeks, not years. His presentation will cover the concepts of proposition sprints, mission culture and empowering people, learning how to pivot and how to encourage progress over perfection. He will discuss a breed of ‘new challengers’ and explore how bigger players can combine their experience and heritage with innovation and technology to stay ahead in this competitive marketplace.

Market Gravity demonstrated how this is achievable on its work with Clydesdale and Yorkshire Banking Group on the launch of B – a customer-design-driven current and savings account that works within a smart app. B is a UK first and promises the fastest account-opening process and a host of features designed to enhance customer engagement and retention. Existing customers can make the transition into mobile banking and younger, tech-savvy users will be attracted by the new experience.

Helen Page will discuss the importance of digital banking to the future of retail banking and how listening to customers and offering new, fresh approaches can help to drive new digital banking experiences.

The RFi Group Global Digital Banking Conference takes place on Thursday 16th June at The Banking Hall, London. For full details on the conference, visit the website.

Read the story on how we helped Clydesdale Bank and Yorkshire Bank create B to become a new challenger.

Want to become a new challenger?

Paul and the Market Gravity team can help you become a new challenger.
Get in touch to find out how.

Email Paul Bowman