HOW NOT TO PAY OFF YOUR MORTGAGE
Role: Cultural Strategy Lead
Challenge: How to help BoS customers pay off their mortgage early
The Brief
As part of a drive to help their audience understand their finances better, Bank Of Scotland committed themselves to helping their customers pay off their mortgage early and save money over time. This doesn’t sound like a complicated problem on the face of it; When you tell someone that an extra £200 a month could shave years off your mortgage, it should be easy, right?
Yeah. It’s not. The fact is, humans just aren’t very good at understanding risk, and time, and money, and rewards. The bank had really struggled to make any headway with this, and I was asked to help them to understand the human mind a little better.
The Cultural Tension
“It is important that people stop beating themselves up over their weakness of will and lack of self-control, and realise that long-term planning is actually an unnatural act that requires outsmarting the brain’s natural focus on the present and near-future.” — Daniel Kahneman, Behavioural Economist
When it comes to money, we're all just monkeys; totally irrational. Fortunately, we're what Dan Arierly calls predictably irrational. By understanding why people behave the way they do when it comes to their money, we were able to create campaigns and tools that could genuinely help.
The Research Findings
When it comes to mortgages, there are basically three things that prevent us from making rational choices.
I am not my future self.
Have you ever woken up with a hangover angry at yourself for staying out late and getting drunk with your mates down the pub?
Think about that the other way around for a second; at some point before you had pint number three, there was probably a little voice in your head asking if you thought it was a good idea. You weighed up the pros and cons, and ultimately, you decided that you'd deal with it in the morning. You'll leave it to future you to sort out.
That's actually a pretty profound idea; we don't really see ourselves in the future as real people.
We idealise their ability to handle hangovers, to make money ("this time next year Rodney, we'll be millionaires!") and to generally work hard and be sensible, despite all evidence in the present telling us that it isn't true.
This is relevant for mortgages because people don't tend to see the benefits of paying off their mortgages for 20 years or more. Sure, I could forgo buying this needlessly expensive pair of trainers and put aside the money for my mortgage, but what do I owe some old dude 20 years in the future?
We had to bring our consumers future-selves to life somehow.
Framing
I did a little study when we first approached this brief. If you ask a lot of people what they would do if they got to the end of the year and found they had a couple of grand they hadn't spent, 62% of people would spend it on their mortgage. That's great!
However, If you ask the same people what they'd do with an extra £5 a day over a year, 11% of people would spend it on their mortgage. Not so great. Especially when you consider that it amounts to the same sum.
The problem is framing; it's hard to see how £5 is going to have any impact on a six figure mortgage, but it does.
We need to help our customers understand scale.
Virtual Money
We are increasingly disconnected from actual, real-life, made of metal or paper, money. We pay for things with a tap from our phones, and commute with an oyster card. We do our banking online and buy things with a string of numbers. It's called frictionless spending, and it's brilliant for the retail industry but not so great if you're trying to save. A report by McDonald's found that the average transaction paying with card was $7 while paying with cash was $4.50. The same report showed that people spend 12% - 18% more when using card than paying with cash all the way across retail.
Here's a thought; when was the last time you actually paid for something with cold, hard cash?
We're becoming increasingly disconnected from our spending.
The Answer: Frictionless Saving.
In an ideal world, saving would be as simple as pushing a big red button on your wall that chucks a couple of quid into your savings account. That didn't seem feasible on the budget, so what are the next best options?
#MISSTHEBUS
The best way to get people to save money is attach it to something they were going to do anyway.
I ride my bike to work. I ride it straight past the bus stop I used to stand at every morning. This bus stop has NFC, just like my oyster bank card.
#MissTheBus is for all the people, like me, who walk or cycle to work.
Using the NFC built into the Bus stop, a Bank Of Scotland ad will let you know that instead of touching in on the bus, you can touch in on the bus stop and the fare you would have spent on the bus will go straight to your savings account.
It might not be much, but it adds up eventually.
#SAVINGHANGOVER
It's easier to give up drinking when you've got a massive hangover than it is when you're on the way to a party.
The same is true of money.
Social media is great at timeliness, and banks are amazing at research and understanding your habits. We know, for instance, that asking someone to save a few quid just after they've been paid is a lot easier than when they're a bit strapped for cash. We also know that talking about saving on a Friday evening is going to be less effective than Monday morning. I created an entirely new social content platform filled with nudges designed to help our consumers to save, rooted in smart understanding of the best times and places to prompt that message.
