Viewpoint: The Gamification of Financial Services

By Trevor Mast, FIS

We don’t save enough, and many don’t save at all. Debts all too often default. The general level of financial acumen is inadequate for the fast-paced, modern financial marketplace. But what if increasing our fiscal awareness felt like playing a game—would that get people to engage and save more? It worked for a pilot in South Africa, and now financial institutions and governments around the world are turning to gamification, the application of game-playing rewards such as points and prizes to encourage engagement, as a way to increase consumer financial education.

An Education Deficit

The days of single-bank relationships between a knowledgeable account holder and his or her trusted bank manager, selecting from a few static products are long gone. As banks have digitized and been joined by a multitude of alternative players, the financial products on offer have changed, too. Consequently, the average consumer has been left behind.

Many of us have become less financially responsible by saving less, living off diverse sources of credit and defaulting on debt repayments all too regularly. Consumer fallibility has reached the point where governments are taking steps to remedy the situation, with many putting the onus on banks for customer education in financial wellness and responsibility. In the U.S., President Obama and the Consumer Financial Protection Bureau supported a bill that passed in December 2014 and cleared the way for financial institutions to encourage people to save by offering them tangible benefits, including cash prizes. The focus is on building financial responsibility and promoting proper use of financial products. Enforced regulatory obligations are not yet on the table, the pressure is primarily that of encouragement, but it is backed up by significant government grants.

Financial Gamification

The reality is that while most people will readily accept that their financial knowledge and behavior could be improved, few are willing to spend the money and time needed to remedy that. The response has been to apply standard elements of game playing as rewards for gaining financial acumen. Those engaging wholeheartedly in educational programs are compensated with points, preferential rates, prizes and good old-fashioned hard cash—the more you learn, the more you earn, so to speak.

Multimedia information programs can be customized to meet the requirements of individuals based on financial position, lifestyle, goals and targets. Completing the programs earns rewards, thus promoting loyalty and openness; and customers are rewarded for responsible saving and meeting debt repayments on time, and rewarded more for early repayment.

The Joys of Closer Engagement

However, the days of people having a relationship with only one financial institution is a thing of the past as customers typically have relationships with multiple financial service providers. Customers pick and choose their providers based on convenience of and accessibility to a specific need, with different providers for savings, mortgage, kids’ accounts, loans, insurance, bill pay and payment accounts. To get a better cross-section, perspective on the complete financial position of any single customer begs a consolidated view across all his or her relationships.

Aggregating data from multiple financial services providers into a single portal could help customers understand their bigger picture and plan accordingly. FIs operating an aggregating portal can have the advantage of a much more complete view on their customers, especially information on products maintained at rival banks. With this information comes great potential for cross-selling and up-selling of their own products—at improved rates.

The Rational Response

There is undoubtedly growing consensus that the ultimate measure of success for financial literacy efforts should be improvement in individual financial wellness. But financial well-being has never been explicitly defined, nor is there a standard way to measure it. A plethora of new market offerings are being rolled out to remedy the situation. One player in the market is SaveUp, an online tool that uses gaming techniques to engage consumers and reward positive financial behaviors, including depositing to savings, reducing debt and increasing financial knowledge. Once a user registers an account, the program uses account aggregation technology to detect these positive financial behaviors and rewards “credits” for performing them.

SaveUp defines the core goal of the experience as increasing user engagement with financial improvement—by encouraging consumers to review their finances on a regular basis, track their progress, and prompt them with education, challenges and other nudges to engage in good actions.

Play the Game

The hope is that all parties win. The state gets informed and cautious citizens, banks gather non-in-house customer data and government funds, and consumers win prizes.

Short-term gains in the form of consumer rewards will certainly get recruits to the financial educational programs, especially if imaginatively presented, but the long-term profits from increased financial stability through knowledge is the ultimate goal. By gamifying the banking process, diligent consumers will buy more appropriate products at better rates as their loyalty and increased know-how is tangibly rewarded.

While financial institutions have been pushed into this new educational role, even in the short-run, the benefits are clear and give them the chance to get up-close and personal with customers. While the reward ratios may be hard to set—high enough that they encourage participation, but low enough that they don’t risk bank bottom lines—educational programs are a low-risk venture, particularly when backed by potentially millions of dollars in government funding. And they also offer the potential to project a more responsible and inclusive image to the public.

The primary target of these schemes is the millennial generation. This is a demographic that has no concept of bank loyalty and is accustomed to shopping around to get the deal that fits best. Banks have the opportunity to help them with a solid foundation of knowledge, enabling them to grow into the increasingly sophisticated tools on offer. With improved decision-making and customized offers from their bank that matches millennial behaviors and life rhythms, FIs have a valuable opportunity to fully engage with their customer base and build a life-long relationship to mutual benefit.

Trevor Mast provides executive oversight of the credit, debit, ATM, software and fraud prevention product portfolio at FIS. This article originally appeared on FIS’s Payments Leader blog, where Trevor is a frequent contributor.

In Viewpoints, payments professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.