May 2019 -

Behavioural Banking: Where health meets wealth

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Gone are the days when banks moved from paper to computers and considered that the cutting edge of technology. First came the data, then the analytic tools. We are now in the epoch of using that data.

Today, banking is all about providing financial services, but we all know that in this smart world, banking somehow still lags behind on one crucial thing – Intelligence. Banking is an age-old industry sitting on a mountain of customer data. If we analyse the data with AI, we should be able to develop a completely different experience for customers.

Behavioural banking is a system where the good behaviour of the customer is rewarded. A new form of banking which is still in its infancy, it was first implemented by Discovery Bank in South Africa in March 2019. This combined healthy behaviour with banking and financial services.

Why is physical health important to a bank?

At a macro level, a healthier person is more likely to keep the economy moving for a long time than a sickly person. At a micro level, the healthier person is also more likely than a sickly one to be financially prudent. In other words, a bank that incentivises its customers to stay healthy can ensure that they become/stay wealthy.

Is this incentivization beneficial? Will it really work?

Research from Discovery Bank says, when individuals are rewarded for behaviour, they do change. In simple terms, it’s like if you asked your child to do well in exams and promised to buy him a new toy or a bicycle as a reward; chances are he will outperform himself.

Likewise, this bank will reward your good health, your family’s good health, and your healthy behaviour with vitality points. That means good health will help generate wealth. The bank can enable this by offering dynamic interest rates, vitality points for visiting the gym, getting flu shots, or buying healthy groceries and so on. This makes use of the 5-3-80 model of financial health. Five controllable behaviours of spending less than we earn, saving regularly, having insurance in place for serious events, paying off property, and investing for the long term can alleviate three key risks of unaffordable debt, exposure to unexpected expenses, and insufficient income in retirement. These risks result in 80% of events where individuals fail to meet their financial obligations. According to Discovery, the extent to which someone engages in the five behaviours correlates with their risk of struggling with debt they cannot afford, being hit with expenses they did not anticipate or retiring without enough money. Focus on these behaviours, and the financial obligations are certain to be met.

The big question is… Do we actually need this?

Early adopters and trendsetters are millennials. If we want a change or any disruptive technology to work, then the generation we should focus on is this one. Behavioural banking is very important for millennials. The reason for this is that their generation as a whole lacks the ability to save smartly, spend wisely, and meet financial needs promptly. At the same time, their erratic and fast-paced lifestyle is causing deterioration in their health as well. So by fixing their health, banks can go from being seen as money-shilling faceless corporations to being trustworthy advisors and financial partners. That’s where the future lies, and it’s up to banks to move towards it.


About Market Simplified: Market Simplified is a thought leader in revolutionising and digitising products for financial institutions by continuously innovating and simplifying finance. We empower our customers with a cutting-edge digital experience that is highly personalised and enhanced for the end users with our ‘Experience Engineering’ platform driven by Analytics, AI, Machine Learning, and Blockchain technologies. Our clientele includes industry leaders like OptionsXpress (Charles Schwab), Currenex (State Street), MB Trading, Maybank Kim Eng, Kotak Mahindra Bank, National Stock Exchange of India, and many others across the globe.

About the author: Pranay is currently an intern at Market Simplified India Ltd. He is pursuing MBA from Great Lakes Institute of Management, Chennai. He loves cooking, travelling and watching movies.

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