In a recent Finthropology podcast, Dr Erin Taylor talks with 10x Chief Client Officer Dr Leda Glyptis about why our emotions matter when it comes to managing our finances.
Erin is an anthropologist based in The Hague who specialises in how people’s financial behaviour is changing along with innovation in financial services. In her discussion with Leda, Erin starts off by asking:
So why do emotions matter when it comes to our finances?
“I have a background in political science and as a result, I know that all social scientists are aware humans mostly make emotional decisions and then rationalise backwards.
It is these visceral emotions that drive most of our choices. So decisions around all aspects of money – such as saving and spending – tend to be wrapped under these strong triggers.
Some of the work I’ve done around lending and credit has made me realise how much shame and anxiety can surround financial decisions. The act of buying a house and getting a mortgage should be filled with joy, but instead, it can be an extremely anxiety creating process that terrifies lots of people.
We have a lot of work to do when it comes to understanding these kinds of emotions. While most of us have credit cards, we still don’t fully know why certain societies view using them with shame, while others view them as a status symbol.
This has a huge impact on the perception of credit products. When it comes to buy-now-pay-later, one of the most interesting angles is the emotion that is wrapped around it and how the category is positioned. Often working to move it away from credit or a loan – which essentially it is – and the emotions they trigger. We have a duty to understand those emotions and not manipulate them.”
Can the new products we see emerging in the debt industry work?
“The answer is it depends. They can work and we should keep doing more to help them work. However, “are they enough?” is a much more interesting discussion.
Financial services providers are largely more responsible and transparent than when I started my career, and that is beautiful to see. That is a combination of very direct pressure from the regulator but also leadership from within those types of organisations.
We are seeing a move away from those slightly scary, slightly obfuscated products.
But over simplifying the process and playing into emotions can often be just as bad and scary …
There is a conversation to be had around whether we should decrease obfuscation but increase friction for important financial decisions. We may want to have a conversation about potentially increasing friction in order to make sure people are aware of what they are doing, even when they aren’t paying too much attention. So, what can we do from a UX perspective to keep it easy to understand but not easy to accidentally slide into it?
We all have a responsibility to inform ourselves before making choices but that doesn’t absolve us as an industry from needing to educate though. After 15 years of transformation and pushing for this, it is important that we continue that advocacy. We can’t fall at the last hurdle now.”
What can financial providers do to help customers with their financial feelings?
“It is a mix of education and better products. I am very optimistic about what the industry is doing and I see all around me how the industry has moved towards adoption of new technologies and ways of working.
The change is profound and will be lasting but it is not done. The journey is nowhere near done and we definitely can and should be doing more.
So what does that look like? Well, for one, as you are transforming your technology, you should make sure that you are passing on the speed and cost benefits directly to your customer. Making a cheaper and more inclusive solution by uplifting the technology.
Secondly, we should be having a dialogue between banks and regulators. There is a pretty aggressive education component being driven by the regulator around protecting the vulnerable. But this is all very new to us and we still have a journey ahead of us.”
What can people do themselves to get a better handle on their finances?
“There are tools now that never existed before. There is work being done in the financial management space that allows you to be more proactive about reflecting on your own finances. There are some tools around managing debt and getting out of debt.
Most of the challengers – and increasingly the incumbents – offer a way of overlaying a financial diary on top of your spend that allows you to see how transactions feel before you make them.
These kinds of tools allow you to start mapping your emotions and the link to your finances, and then managing them. So if there is anxiety around budgeting, there are some great budgeting tools. If you are terrified of getting into debt but need to leverage credit, there are some interactive tools out there to help you to understand how you can service your own financial needs in line with your comfort levels.
With banks increasingly deploying new tools and technologies to change the way we bank, mapping the emotional, as well as financial, journey, it's never been a more exciting time to be in the industry!”
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