How to Apply Behavioural Science for Better Results Financial Services

At Capuchin, our behavioural science approach has reduced cost per acquisition by 39% for a financial services brand, and driven referrals of 4,000 new high-value customers in a week for an investment brand.

Picture: Karolina Kaboompics

The psychology of finance

Would you like to buy a JPG of a monkey? It can be yours for £50,000.

At least, that’s what Justin Bieber’s Bored Ape NFT was last valued at. It might sound like a lot, but it was priced at over a million pounds in 2022.

The NFT craze is a great example of how consumer behaviour – even in financial services – is influenced by irrationality, emotion and bias. In this case, heuristics like the bandwagon effect and scarcity played a big role.

It was understanding behavioural science that helped us reduce an insurer’s CPA by 39% and add 4,000 new customers in a week for an investment brand.

Behavioural science is vital for survival in financial services. Without it, you risk stagnation as your competitors better understand and influence the market.

The fact is, all of us – including your players – are cognitive misers. That means we have very limited brainpower for paying attention to the world and for making decisions. It’s impossible to put a number on it, but one guess based on sensory neurons firing in the brain is that we’re consciously aware of only 0.0004% of everything the brain is processing at any one time.

We can’t think through all of our decisions carefully, so we have to rely on quick shortcuts called heuristics. If one bank has good reviews and one bank has bad reviews, which will you choose? It’s an immediate gut response with little careful thought – and these gut responses can be turned into practical ‘nudges’.

This reliance on heuristics is true even when you’d think people would be careful and logical – like financial services. For example, one study found that logins to an investment app correlated with the performance of the stock market: the worse the market was doing, the less likely people were to log in. When the news was bad, they didn’t want to know. It’s called the ostrich effect.

Here are three examples of how to nudge behaviour in financial services:

😌 Fluency. People have limited time, energy, and brainpower. You must make things as simple as possible. One study found that for every ten funds added to a pension plan reduced participation by 1.5-2.0%.

👉 Defaults. Being cognitive misers, we tend to go with flow and choose the default or recommended option. The UK’s opt-out pension scheme increased yearly pension contributions in real terms by £33 billion within ten years.

⏰ Future Discounting. The future feels a lot less real to us than the present, which partly explains why people fail to invest and save. But you can flip this around, encouraging people to commit to saving in the future, as the Save More Tomorrow scheme proved.

How does it work?

Whatever your challenge, we’ve most probably faced it - or very similar before.

From payments to pensions, from investments to innovative new offerings. From families to funerals.

Whether your audience is made up of consumers, businesses large or small or high net worth individuals. Even if it’s persuading businesses to offer your product to their customers.

Whatever the challenge – acquiring more customers, converting more leads or unlocking the value of existing customers – all around the world, we’ve probably done it.

Example 1 - Reveal new opportunities

We show you the real traits, motivations and triggers that drive your market. We quantify the value of commercial opportunities, then precisely detail the best ways to address them based on their psychological makeup – even down to specific ideas, words, language, images and colours that will be most persuasive.

We used this approach to reduce one brand’s CPA by 39%.

Example 2 - Be more persuasive

We create greater appeal for what you offer, based on how your audiences consider and mentally process decisions in your category. We do this using bespoke psychological research techniques like psychodynamic qualitative interviews or implicit testing.

We used this approach to double conversion for one multichannel brand.

Example 3 - Shift behaviour

We identify psychological motivations and triggers at the most crucial points in the customer journey. We use our understanding of cognitive biases to create behavioural “nudges” to shift your audience’s behaviour.

We used this approach to add 4,000 customers in a week for an investment business.

Ready to Nudge?

Wherever there’s behaviour to change, we can help.

Share your challenge, and we’ll show you an agile, effective way you can start applying behavioural science.

Talk to us today about how you can start scientifically improving results.

Still more questions? Just ask.