Context

As part of the UK Financial Capability Strategy, MAS commissioned research to build the evidence base and inform effective practice. As part of the What Works Fund, MAS established the Financial Capability Lab to identify rapidly test new approaches to delivering effective financial capability support for the “financially squeezed” – the quarter or so of the UK population at risk of financial shock and least likely to seek advice and guidance. The intention was that promising approaches could be piloted further.

The study

The Lab was designed in 2016 to use behavioural insights to generate new ideas to help deal with three central challenges in meeting the needs of the financially squeezed: encouraging savings to withstand financial shocks, promoting use of financial advice and guidance, had helping people to take control of their spending and use of credit. For each question, the Lab undertook an initial literature review to identify behavioural barriers, involved 90 experts to generate 244 innovative ideas. 17 ideas were chosen for further study on the basis of potential impact and feasibility. The Behavioural Insights Team (BIT) then tested them through online randomised-controlled experimentation (10,500 participants) and qualitative approaches (80 participants). This report focuses on six key emerging themes, contextual factors and next steps. Given the range and detail of approaches tested, this summary does not include reported confidence levels.

Key findings

• Changing default prompts or focusing on date of debt clearance in indicative “sliders” led to more effective repayment plans.
• There was interest in paying off consolidated debt through salary repayments and then carrying this through automatically to savings schemes that begin at 50% of the monthly debt repayment, offering a “windfall” effect.
• “Sidecar accounts” could allow people to build emergency savings alongside pension contributions, but attitudes depend on clear information and the anchoring effect of initial information offered.

• People presented with limited key points, sliders to calculate information, use of pound values rather than interest rates and years and months rather than months alone understood credit card offers better. Use of contrasting colours to highlight information also helped.

• After setting an initial budget, people were more willing to bank small underspends, whether to savings or with the offer of a prize draw.
• The Department of Work and Pensions “Tell us once” offer, which simplifies reporting of bereavement across various services could be sensitively added to offer financial advice at such a critical life moment. Similarly, financial institutions could signpost guidance and products through analysis of live customer data, although there are issues of trust to overcome.

• People welcomed the idea of being able to block credit offers – including a “take control” offer that registers the commitment with credit rating agencies and may help improve credit ratings. Simple sign-up is crucial. Personalised “card blocking” and systems to prompt people to save were also welcomed. “Cook and Save” would link savings goals to commitments to cook food from scratch, including prompts, recipes and portion costs.

• People welcomed the idea of “savings supporters” who could help motivate them to reach goals. This can be supported with text messages, apps and integration with online banking. They also liked the idea of “financial guidance first aiders” in workplace human resources teams who could signpost independent advice.

• Prize draws based on engagement with financial advice could increase take-up, while many of the ideas outlined above involve emotionally engaging design.

Points to consider

• Need to refer to individual studies.

• Financial institutions looking to align social impact and commercial goals;
• Fin-techs looking to trial a new behaviourally informed interface;
• Government agencies looking to serve UK citizens more effectively.

• At piloting stage, Phase 2 underway