Sam had just started using the ‘Monzo’ app to help him control his spending. His partner had asked him to. “It’s really working!” he said, showing me the alert system he’d set up on his phone that messaged him when he was ‘overspending’. My ears pricked up: Monzo is often cited as the holy grail of how the FinTech world is changing consumer behaviour.
However, I soon realised that Sam was not really getting the benefit from his Monzo account. When he was close to overspending, he would just use a different account instead. Sam’s spending remained the same. He felt he was sticking within his budget, pleasing his partner and feeling ‘in control’. Actually, he was cheating the system and not achieving his money saving mission.
And this story isn’t an isolated one, our personal financial management tends to be inconsistent, whether we know it or not. We are constantly earmarking, segmenting and re-balancing our money and financial situation, whilst maintaining the idea that we have a consistent, controlled approach to managing it.
To understand what’s really going on, it is critical to observe behaviour in the context of social relationships. As Sam shows, there is a big discrepancy between what people say they do, think they do and what they are actually doing. If we focus on self reported behaviours, statistics and outcomes (often the temptation in financial research) there is a danger of missing the areas where some of the best innovation opportunities lie. We need to uncover patterns and analyse the interplay between financial services and real life. As the psychologist Solomon Asch said, "Most social acts have to be understood in their setting, and lose meaning if isolated." This is why ethnographic research, capturing behaviour in the moment, is so valuable to the financial services industry
But is Sam simply a fool? An outlier? Surely the majority of us are much more savvy with our finances? Well actually, no. People are consistent in their inconsistency. Our actions, finance related or otherwise are the result of complex, socially constructed behavioural biases and heuristics. Indeed, our decisions are laden with symbolism and forces which are invisible to the decision-taker. If you think your finances are cut, dried and devoid of emotion, think about the last two transactions you’ve been involved in this week. It’s almost impossible to remove your cultural influences from your purchases - nobody’s finances sit outside the forces of culture and identity.
Recently I met Clara whose story, like Sam’s, highlights just how important it is for financial services providers to see the bigger picture. Clara is 31 and lives with her boyfriend and her 12-year-old son in East London. She tells me she mainly manages her money online, has a good filing system and, while she has a payday loan, she’s generally on top of things. She’s not trying to deceive me; this is how she sees herself. Importantly, she is from a well-off family and feels judged by them for being somewhat different. This has made Clara keen to appear more financially in control than she actually is.
At her house, I ask to see her correspondence with the payday loan company. When she opens the cupboard, stacks of papers cascade out and we can’t find what she is looking for. We stuff the papers back in the cupboard and I ask her to show me how she manages her finances online. She can’t remember her login details and it’s obvious she hasn’t logged on for a long time.
During the day, Clara receives three phone calls from the loan company, which she ignores.“I don’t want to talk to them,” she tells me. “I’ve only borrowed £200, anyway. They can’t put much interest on that. It would be unreasonable, so I’m not in a hurry.” She didn’t read the terms and conditions, but says they should be reasonable about things, as “they are a well-known company.” She destroys all their letters, because her boyfriend doesn’t know and he wouldn’t approve.
Clara’s experience is bound up in her cultural ecosystem and her relationships. She wants a private and personal relationship with her financial service provider. Just like Sam with his Monzo app, this is also complicated by her ‘projected’ self – how she sees herself and wants to be seen by others. Both customers want the appearance of being in control, and on the surface, they will both tell you they are on top of their finances because their answers are based on how they see themselves and how they want you to see them.
Money in the UK is a very private affair. It is tied up with your class and position in society, and understanding how people spend their money is a very revealing and personal matter. Financial services providers need to do more to create a private and personalised connection to their customers in order to create more trust. To do this, they need to understand how people project themselves, view the realities of their everyday lives and identify their cultural influences. As the diagram below shows, all three of these elements combined will allow Financial Service providers to do the following:
1. Understand how to market to customers
2. Reveal how consumers are using their products
3. Fathom the cultural norms they need to operate within
This article was first published on the Financial Services Forum