HSBC launches 'nudge theory' banking app to help customers manage finances
App developed in six weeks uses real-time analytics to alert customers on spending habits
HSBC, one of world's biggest banks, is trialling a new consumer mobile app using real-time analytics and 'nudge theory' to help its 17 million customers better manage their finances.
Nudge theory is the idea that indirect suggestions and alerts can encourage individuals to make better decisions. For example, a mobile notification from HSBC which tells the customer they spent over £100 on coffee in the last month might encourage them to spend a little less on hot beverages.
The development of the app - which was built in just six weeks - follows an HSBC commissioned report by the London School of Economics, which suggested that leveraging technology such as automated messages to ‘nudge' people could encourage better spending habits.
HSBC Nudge is hosted in a newly built cloud infrastructure and was put together by the bank's ‘scrum' collaboration team. The idea of taking the scrum approach was part of a move away from the "rigid" waterfall approach to building new apps and features and to take a "take a customer centric approach to building the app".
The app analyses real-time customer analytics to identify trends in users' spending habits, using this data to send targeted nudges as alerts to inform people about patterns in their expenditure. According to HSBC, it is "designed to encourage customers to act to support their financial intentions and longer term goal".
Raman Bhatia, head of digital at HSBC UK, said: "We know that many of our customers have good intentions for their financial futures, but that willpower alone is not always enough to drive a long term change in behaviour. By incorporating nudge theory into our digital customer communications, we can encourage customers to adjust their behaviour to achieve their financial goals
"By enabling the team to challenge the traditional product development approach through the scrum way of working, the delivery timeline for HSBC Nudge was significantly reduced - a first for the bank.
"This approach to technological innovation will be adopted across our business, enabling more efficient and agile development of our core banking technologies," said Bhatia.
The app will be trialled by 500 customers over a three-month period, during which time HSBC will analyse data and experiment with different types of nudges to examine what is most effective.
Professor Paul Dolan, a specialist in behavioural science at the London School of Economics, welcomed the trial. "Just as personal trainers can be effective in helping individuals stick to their exercise goals, financial institutions can play an important role in helping their customers follow through with their good financial intentions," he said.
"It is great to see that HSBC is using the lessons from behavioural science to change customers' behaviour and improve their financial wellbeing," he added.
The nudge trial follows the introduction of a text-alert service, which warned HSBC customers when they were approaching their overdraft limit, something the bank claims has saved customers more than £85m in overdraft charges since it was introduced.