HSBC says it is running trials with the world’s first banking app combining ‘nudge theory’ with customer data.
The app will alert customers to their spending habits – such and how much they spend on groceries a week – and lets them know how their spending or saving trends compare to others in the same income bracket.
“Nudge theory is grounded in a simple idea, which is what we intend to do is often a world apart from what we actually do,” explained Raman Bhatia, head of digital at HSBC UK. “In my own case I have a sweet tooth and had too many sweeties over Christmas. So my wife is using old fashioned nudge theory in the form of yellow post-it notes on the fridge reminding me that’s enough. That’s really what nudge theory is – it’s trying to build a bridge between our good intentions and action.”
A recent study by the London School of Economics and Politics, commissioned by HSBC, used behavioural science to explore the barriers people experience when trying to achieve their financial goals. It identified that leveraging technology, such as automatic messages, was key in encouraging people to meet their financial ambitions.
HSBC designed its Nudge app in-house in six weeks and is testing 38 types of nudges in a trial with 500 customers.
“If you normally spend £15 a week on coffee and last week you spent double that, we alert you,” Mr Bhatia said. "We also compare you to others like you based on your earning patterns and the type of account you hold. So if people like you spend less on eating out and as a result save more, we’ll let you know. We also have nudges which are acknowledging, rewarding, encouraging, like ‘Well done – you hit your savings target for this week.”
This trial follows the successful of a text alert service that warns customers when they are approaching their overdraft limit. HSBC says this has already saved its customers over £85m in overdraft charges since its introduction, with £800,000 saved between Christmas and New Year alone. Mr Bhatia said more than 50 per cent of people actively respond to these alerts. The bank has 17m UK customers and 3,700 staff in Scotland.
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