Credit Union Changes Behavioral Economics

Want to Change Behavior? Make it Simple.

A credit union was frustrated.  A significant number of their members had little to no savings.  To help, the CU provided financial literacy training. The class was well attended, and at the end, participants agreed they needed to save more and most were able to identify at least three things they could do immediately to begin the journey to better financial health.  Yet, a few weeks later little progress had been made and even less was noticed after several months.


The credit union didn’t understand the disconnect.  They taught quality lessons, but no difference was realized. 


So to get different results, they did something different.  The services of a behavioral economics (BE) consultancy were brought in to help answer the question, “Why don’t my members save?”  The BE team went to work and identified a number of factors at play.


A key finding: the Credit Union made it difficult to save. 


The BE team discovered that despite earlier campaigns many members did not have direct deposit; instead cashing their paycheck at a branch.  Cashing a check and taking all the cash was easy, but putting some of the paycheck into their savings account required a form and extra steps.  The CU made it harder to do the smarter behavior, or as BE calls it: too much friction. 


The solution: make the saving choice at least as easy as the spending choice.  When the effort to spend vs save was equalized, savings balances for these members grew.


Behavioral economics deals with issues like friction, as well as defaults, framing, and loss aversion.  These supposedly irrelevant factors have a huge impact on the way we analyze choices, make decisions and behave. 


Learn more to connect better with your customers.

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