Unexpected expenses can mean that consumers need to do without essentials or borrow at high interest rates. Six in 10 Irish consumers face unexpected expenses every year and having a savings buffer can help. In 2018 The Competition and Consumer Protection Commission (CCPC) conducted a Financial Capability and Well-being Study in Ireland which found that active saving was one of the two key behaviours that directly affected financial well-being, along with not borrowing for daily expenses. The study also found that a significant number of people have little financial resilience beyond meeting current commitments and that 52% of people are meeting current financial commitments, but have little provision against financial shocks.
As a result, the CCPC commissioned behavioural research in 2019 with the Economic and Social Research Institute (ESRI) to test different interventions and find out what works when it comes to encouraging consumers to build a savings buffer. The interventions were tested on real-life consumers between May and the end of November 2021 and the trial was facilitated by Bank of Ireland. The study is the first trial of its kind in Ireland and one of the first in Europe.
We are aware that not everybody has the ability to save and there are those who may need all their income to cover their day-to-day expenses with very little to put by at the end of the week/month. These were not the consumers targeted in this research. The consumers we aimed to reach were those who have the capacity to save, but are not currently saving.
Summary of the research results:
- The research shows that applying behavioural science to customer communications and the design of application forms can increase the uptake of savings accounts by over 25%.
- Detailed analysis also suggests greater benefit among customers on lower incomes, who are most vulnerable to the negative effects of financial shocks.
- Consumers that were sent marketing emails with consumer-friendly infographics that illustrated financial shock statistics, for example; “6 in 10 people face an unexpected expense each year” – were 20% more likely to open a savings account than those who received standard marketing materials.
- There was no consumer detriment (no increased debt or overdrafts) as a result of the trials.
The CCPC in conjunction with the ESRI has produced a guide for providers on how they can use the recommendations to help improve their customers’ financial well-being Improving Financial Well Being Through Short Term Savings: A Guide for Financial Providers to Help their Customers Save.
The ESRI has also produced a working paper which provides detailed information on the methodology and findings of the researchReturn to Market Research