Behavioral economics, the study of human behavior regarding decision making, is the latest field of study BBVA is using to improve customer experience and simplify banking for its customers.
In 2017, the BBVA Group began forming teams to study how people make decisions and what obstacles prevent them from making good ones – particularly as it relates to their unique financial situation. The endeavor was deemed valuable, not only because studies show that companies applying behavioral economic principles outperform peers in both sales growth and gross margin, but more so because behavioral economics helps the bank more deeply understand why and how people make the decisions they do when choosing purchases or making decisions.
According to BBVA USA Behavioral Economics Discipline Head Michelle Gels, this is important because it is a critical piece to fulfilling BBVA’s purpose, which is to create opportunities.
“Our objective is always to help consumers achieve their financial goals, from the simplest to the most complex,” said Michelle Gels, Behavioral Economics Discipline Head for BBVA USA. “We have learned through our own research that by simplifying language or streamlining options — particularly in a digital environment — we can guide consumers through a complex process in a way that feels comfortable and intuitive.”
One way BBVA uses behavioral economics to guide decision making is by eliminating the issue of presenting too much information at one time, also known as cognitive overload. For example, many banks present credit card features in a list or chart, with no real guidance around which card might be best suited for a consumer. One of BBVA’s country units tested credit card descriptions that also included information about which customer group was most likely to prefer each card. Gels explained that “by providing an indication of what other people choose, customers have an easier time focusing on the option that may work best for them.”
In another use of the cognitive science, BBVA’s mortgage group in Spain took on the task of simplifying language and providing easy-to-use calculators in its online mortgage and loan applications. By using more consumer-friendly language, the group was able to realize an increase in completed applications of more than 150 percent.
The global bank has even found a way to use behavioral economics to impact its efforts around diversity and gender equality in the workplace. For example, because women are more likely to view a job description as a list of required qualifications for the job, they were less likely to apply for higher level positions within the company. In an effort to encourage more women applicants, a single line of business within the bank conducted an A/B test which reorganized the way preferred and required criteria were listed. After redesigning job description templates and changing some of the language used to describe jobs, the line of business saw a 30 percent increase in female applicants.
“The changes we’re making as a result of our behavioral economic research are very subtle,” said Gels. “They’re not intended to influence decision-making in any way; instead, they’re meant to provide information in a transparent and clear way that is most useful in making the decisions that can make a positive impact in customer – and employee – lives.”