Improving the financial wellbeing of our customers is at the heart of what we do. It is an integral part of our role in supporting Australia’s economy and is a responsibility we take seriously.
Improving our understanding of how people make financial decisions can ensure that we design products and services that deliver meaningful results. But we know we can’t do that by assumption or intuition – best practice can only be achieved through disciplined testing and gathering evidence.
At the recent Sibos conference, CommBank General Manager of Group Financial Wellbeing Mohamed Khalil explained how he brought together a team of data, digital and behavioural science experts three years ago to accelerate the Bank’s purpose of improving the financial wellbeing of its customers and communities.
The team’s work has today resulted in world-first digital products that have improved not only the financial wellbeing of customers, but bank satisfaction and performance. Significantly, this scientific approach has produced five of the most used services on the CommBank app. Clearly, we are getting better at meeting customer needs.
So how did we do it?
In economies around the world, a third or more of customers consistently spend more than they earn. A third can’t access $500 of credit in an emergency and three-quarters are not adequately prepared for retirement.
This is the Prosperity Paradox: while the banking industry is becoming more efficient and profitable, that success and prosperity is not translating directly to customers. And as customers see a widening gap between the banks’ performance and their own, key pillars of bank trust (authenticity, empathy and competency) erode.
To deliver banking services that truly improve the financial wellbeing of customers, the Group Financial Wellbeing team began to apply a new approach focused on three outcomes:
- To define, measure and understand financial wellbeing;
- To understand and improve human decision making through behavioural science;
- To accelerate the delivery of proven solutions at scale.
Through a partnership with the Melbourne Institute of Applied Economic and Social Research, the team conducted rigorous scientific analysis that allowed it to deeply understand financial health and its core elements. It devised a language that would resonate with colleagues as well as customers.
Known colloquially as the “Days’ Framework” it clearly defines financial wellbeing:
- Every Day – meeting daily needs, debts, and obligations
- Rainy Day – being adequately prepared for shocks and emergencies
- One Day – savings and progressing towards future goals.
The science also led to two related but distinct measures of financial wellbeing:
- A “Reported” measure using a five-question survey that evaluates how the customer feels;
- An “Observed” measure that uses bank data to evaluate how the customer is actually doing.
Each translates into a simple 100-point score.
“The simplicity of the Days’ Framework and the 100-point score is underpinned by rigorous scientific and statistical analysis with meaningful accuracy,” says Khalil.
This measure allowed the team to identify the strongest drivers of financial health. Intuitively, you may expect education, employment and income to be most meaningful, but active management of finances coupled with good spending and savings habits were far more important. This powerful evidence helped to support the team’s decision to invest further in the application of behavioural science to some of the most difficult financial wellbeing challenges.
The unappreciated volatility of managing the timing of income and expenses, and the confusing choices of when and how to repay debt, and where and when to invest were common issues for customers.
“Our financial wellbeing experts interrogated our data to deeply understand each issue and our behavioural scientists helped explain the behaviours and potential ways to change them, often resulting in solutions counter-intuitive to the common knowledge in financial services,” said Khalil.
Many of these challenges were often at the edge of known behavioural science. In response, a partnership was established with Harvard’s Sustainability Transparency and Accountability Research (STAR) Lab and several universities to build effective solutions using the best available insights and evidence from leading global researchers.
“Once we had our strongest evidence-based solutions defined, we worked hard to find clever ways to run rapid, but valid, experimentation so as to quickly deliver solutions at scale,” said Khalil.
Some examples include:
- Goal Tracker, a digital experience that drove 20% of non-savers to start saving consistently;
- Benefits Finder, a service that matches customers against more than 250 government benefits and rebates to determine which ones they may be eligible to claim. So far, almost one million customers have accessed hundreds of millions of dollars in benefits.
Significantly, our ability to monitor customer financial wellbeing allowed the Institutional Bank to provide the government with timely information on the impact its pandemic support policies were having on our communities.
CommBank’s Financial Wellbeing team continues to apply this evidence-based approach across the bank to improve the design of products, services and experiences.
“We are very excited about the future impact we can have with this capability. And now can now prove if we’re making a difference,” says Khalil.