The Unfulfilled Promise of Behavioral Science in Fintech

It wasn’t too long ago that Medium articles, blog posts, and press releases everywhere were singing endless praise to behavioral science — specifically to its potential in consumer finance. Pundits were promising that its application would unlock better user experiences and improve financial health through education and easier ways to save. What felt most promising was behavioral science’s potential to open up new revenue streams and increase ROI for banks, insurance companies, and startups that were considering taking it on.

Back in those days, I remember thinking that it wouldn’t be too long until I’d open up my banking app and see features like personalized savings plans based on my spending habits, nudges for healthier financial behaviors, and interactive educational tools that adapt to my financial literacy level and savings goals. I thought it would be a real race — that banks, new fintech (such as roboadvisors), insurtech, and other consumer finance companies would rapidly test and deploy features or even entirely new products based on what was coming out of the field. 

So what happened? Are many of these consumer-facing apps informed or even powered by behavioral science? Are these features really delivering the game-changing results promised to both users and the executives behind them? Are customers able to save more and feel more in control of their finances? Are the leaders who delivered these products getting promoted? Or did the field promise too much? 

Above all else, one thing is clear: despite some hiccups, our field is continuing to grow. Behavioral science practitioners who understand the business context as well (if not better) than the science consistently deliver results that surpass leaders’ expectations. Our team has not only noticed this pattern in other organizations, but we’ve managed to deliver these results ourselves. One nudge unit we helped to create now delivers over $6M in annual revenue increases. We’ve also helped bring fintech products to market that have behavioral science at their core, and the banks we’ve worked with on proprietary research continue to reap the rewards of the studies we conducted. 

Over the past seven years, TDL has had a front seat to the show — giving us a unique perspective to answer all of these questions. In this three-part article series, I’ll explore the strategies we’ve seen push us, the field, as well as practitioners and companies we work with toward fulfilling promised value. But first, let’s start where behavioral science has seemed to fall short…