This blog originally appeared on the CFSI/JP Morgan Chase Financial Solutions Lab Medium. ideas42 is proud to serve as a behavioral advisor to the Lab. 

In New York, 22-year-old Sean had been using a savings app called Even for about eight weeks when he realized something that surprised him: by automatically saving his higher-than-average income, he’d saved up enough to pay off $2,500 in credit card debt that had been hanging over his head.

In a California suburb, Miranda, a single mom, uses SupportPay to regularly exchange money with her ex-husband for child-related expenses — putting the transactions online and taking financial tensions away from her two young sons.

And last month, a single mother of three in Philadelphia was finally able to sign up for food stamps using a tool from Propel called EasyFoodStamps — taking an extremely lengthy application and making the process quick and easy. Instead of waiting in line for hours or navigating complicated paperwork, Propel’s simple Web form allowed her to spend the afternoon with her kids.

Then there’s Sam. He’s 28, rents his apartment and makes $45,000 per year — but he has a FICO score of 650. He’s using a program from Ascend called RateRewards, which enables him to reduce his loan interest expense by showing positive financial behaviors. In the last four months, he has earned nearly $50 in rewards by demonstrating positive financial behaviors that other lenders ignore. At his current trajectory, he will effectively reduce his interest expense by 20 percent, saving nearly $400 in interest over the life of his loan.

All four of these financial products are creatively improving the financial health of their users — and that’s not the only thing they have in common. Each of these companies is also part of the Financial Solutions Lab.

A virtual lab

The Financial Solutions Lab — or “FinLab,” as we call ourselves — was founded in 2014 in a rather unusual partnership between the Center for Financial Services Innovation (CFSI) and JPMorgan Chase & Co., which committed $30 million to FinLab over five years. The goal was to be a virtual laboratory for technology companies building solutions to make financial health a reality for more Americans.

In February 2015, we launched our first challenge, which sought solutions to help Americans better manage cash flows (i.e. the spikes and dips in incomes and expenses that can make financial health out of reach). We knew this was no small nut to crack: According to CFSI’s research, the 100 million Americans who are affected by this issue spent $138 billion on products and services to manage their way through it.

In the first challenge, we received applications from nearly 300 fintech companies vying for $250,000 each in capital and access to resources through CFSI and its partners. In April, we announced nine winners: Ascend Loan, Digit, Even, LendStreet, PayGoal by Neighborhood Trust, Prism, Propel, Puddle, and SupportPay. Taken as a group, you’d think these companies have very little in common. But the one thing they do share is that each has developed an innovative solution that can help Americans better manage their financial lives.

So why do we even care about financial health? The facts on American financial health are daunting: A report from the Federal Reserve revealed 47 percent of Americans could not weather a sudden $400 emergency expense without borrowing money.

Good news/bad news

There are two ways to see this: as terrible news or as an extraordinary opportunity for leaders to step up and effect positive change. FinLab director Ryan Falvey sees opportunity — and is determined to help scale products with potential to bring financial health to more Americans.

“Instead of aiming to bring new ideas to market like an incubator or helping companies develop to a certain point — typically to raise capital, like an accelerator — we want to actually change the underlying market,” says Falvey.

“We’re looking to highlight early-stage products that are already in the market, and help those companies grow to massive scale,” he added. “As such, many of the firms we select to join FinLab are not participating for the capital. Instead, they see us as a long-term partner who can help them build relationships and networks to get to large-scale success.”

Our tools for success include everything from networking and design to professional, legal and regulatory advice — the kind of thing not typically available to early-stage companies. “FinLab facilitates connections with senior leaders across the financial services industry that are often hard to access,” Falvey says. “These doors are opened because the Center for Financial Services Innovation and JPMorgan Chase think these products improve consumer financial health and should be supported. And we help make it happen.”

So we did a quick poll — just why did these companies apply to FinLab? Turns out, it wasn’t really about the money.

Jerry Nemorin, LendStreet: “We benefited from participating in accelerator programs in the past, but needed industry connections to enable us to raise our profile and grow quickly while building a product that stays true to our mission.”

Ethan Bloch, Digit: “We’ve created a product with the vision of getting every household in the U.S. at every income level to save, which is a long-term goal that requires long-term partnerships. We looked to FinLab to help us develop partnerships and find the opportunities we needed to achieve our vision.”

Steve Carlson, Ascend: “There are always obstacles to disruptive technologies. In financial services, the obstacles are larger than most and come in the form of regulation on everything from where you do business to how you describe your product. We applied to FinLab to get access to partners that could help us think carefully through these obstacles and prepare for the road ahead.”

These are just a few of the conversations we had throughout our first year. Meeting with fintech innovators across the country inspired our team and renewed the passion we have for FinLab.

“Ultimately, we all want better financial products,” maintains Jennifer Tescher, president and CEO of CFSI. “And we think the future of financial services will be one where providers compete to improve the financial health of their users.”

As FinLab evolves over the next few years, the challenges will evolve too. If you’re a fintech founder who wants to turn your product into the prescription for financial health, our next fintech challenge, Solutions to Help Americans Weather Financial Shocks, has just been announced. And who knows, maybe you’ll be joining us for year two. Apply now: https://www.f6s.com/finlab. Applications are due April 7, 2016.

The post Guest Post: FinLab Pushes Financial Health Agenda, One Challenge At a Time appeared first on ideas42.

Why we’re wrong about lower income consumers, a three-part series

Products and services that help low- and moderate-income (LMI) consumers manage their day-to-day finances and improve their long-term financial health are a clear need that hasn’t yet been solved by mainstream or alternative financial providers. Why haven’t the needs of LMI consumers been met by the market? The latest research uncovers three pernicious myths that discourage innovation for the low- to moderate-income segment: that lower income consumers don’t want to save, are bad at managing their finances, and don’t have the money to pay for financial services.

In this series, a companion to our recent white paper, Reimagining Financial Inclusion, we’ll tackle each of these three myths in turn. If you haven’t read Part 1 yet, you may want to begin there.

Part Two

We all know that managing our finances day-to-day is no easy task. Keeping track of multiple obligations that have different deadlines (and different consequences if missed) can feel impossible, especially when added to the other items on our everyday to-do lists. Part of the challenge here is our limited working memory, which is best at remembering just seven units of information at any given time. On top of tracking and remembering what we should be doing at any given moment, when it comes to managing our money, we must also exert self-control to choose the most cost-effective option – which we know only further depletes our finite cognitive bandwidth.

To make it worse, half of families experience wild fluctuations in income of 25% or more in a given two year period. Households with lower incomes experience the most volatility, with significant income dips every third month. This lack of predictability in family cash flows is so difficult to manage that 92% of surveyed households would prefer stability to moving up the income ladder. Stop and think about that statistic for a moment–9 out of 10 Americans would choose stability over an increase in income. Quite a startling realization.

For someone who has a sufficient financial “cushion” to cover unexpected financial events, it may be tempting to blame the volatility and financial strain that LMI households face on their own management abilities. Yet again, the research says otherwise: LMI consumers are much more aware of their finances and much less susceptible to biases that could lead to overspending than higher income consumers.

MYTH #2: Lower income consumers are bad at managing their finances.

FACT: LMI consumers actually know more about their finances and are less susceptible to certain cognitive biases than higher income consumers, and they frequently use creative solutions to commit themselves to positive financial behaviors.

• Lower income consumers are three times as likely as higher income consumers to know the starting taxi fare in their city and twice as likely to engage in trade-off thinking when contemplating a non-essential purchase.

• These same consumers value goods more consistently than higher income consumers, who are more likely to change their willingness to pay a certain price based on where they encounter the item, like the price of the same beer in a store vs. a hotel, for example.

• They even report using creative informal solutions to stick to their financial goals, like freezing a credit card in a glass of water, giving cash to a “money guard” to hold, pre-paying bills, and budgeting cash with physical envelopes.

A close study of cash flows revealed, many LMI consumers carefully allocate and account for each dollar of income: “Sometimes I get paid and I feel like I’m bound by my check before I even get it. It’s already spent. I can tell you exactly where it’s going.”

The bottom line is that constant money management requires significant mental effort. For people without a savings buffer, even a small financial misstep or unexpected expense can have big consequences, like a car breaking down and requiring a high-interest rate short term loan to fix. In order to free up mental bandwidth and achieve long-term financial health, LMI households need products and services that are well-designed to address these needs – with smart alerts about low balances and due dates, automated savings transfers and bill payments, and access to affordable lines of credit. Learn more about the other myths surrounding LMI consumers and ideas for a better financial solution in our report, Reimagining Financial Inclusion.

Click here for an in-depth look at another dangerous myth about LMI consumers.

The post Three Myths About the Underbanked, Part Two: “I Can Tell You Exactly Where My Paycheck Is Going” appeared first on ideas42.

Tax Day – April 18 – is just around the corner. But you probably don’t need the reminder since you effortlessly filed your return in January, right?

Taxes are a pain. You have to track down documents, navigate jargon, and answer countless questions. On top of the hassles, it’s anxiety-inducing to figure out how much more money you may owe (“lose”), and thinking about your finances isn’t exactly the ideal way to spend a nice spring day. Plus, the headache doesn’t end when you hit “file”. Even after submission, you may grapple with looming suspicion that a few innocent miscalculations might lead to an audit or a correction that leaves you owing more.

Governments and social service organizations have tried to reduce inefficiencies and simplify this process. They offer programs like Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) to provide free tax filing support for low-income and older populations. But local VITA sites face their own behavioral and operational challenges. Many VITA sites are overwhelmed with demand in January, when W-2s arrive and taxpayers who expect a refund immediately come in for support. Then there’s another demand peak – the mad rush to submit on time in the last few available days before the deadline. Many sites aren’t staffed to handle these surges.

So what could be done to spread visits throughout tax season and keep volunteer tax preparers from being overwhelmed by the traditional spikes in demand? What can we do to enhance this helpful service for these taxpayers?

It is exactly to explore these types of efficiency and delivery related questions affecting VITA and many other programs that we created our latest initiative, Gov42: Behavioral Science Innovations in Government. Through Gov42, we’ll be working with state and city government agencies, helping them to apply the insights and methods of behavioral science to improve programs and better serve the American people.

Wherever people interact with a government program or process, behavioral science can be applied to make it more convenient and easier. Whether it’s simplifying an application form or making it more manageable to weigh seemingly complicated options, good behavioral design helps people cut through the clutter and focus on what’s most important for them.

Our Gov42 team is now actively exploring a number of significant partnerships with state and city governments interested in designing and testing innovative, behaviorally-informed solutions to improve policies or programs across a variety of issues, including health insurance, child welfare, education, and unemployment.

Results from our Gov42 work will be widely shared to maximize social impact and promote efficiency across all levels of government, all at no cost to state and local agencies.

Click here for more info on Gov42 and to engage with ideas42 as a partner.

The post Introducing Gov42 appeared first on ideas42.

For most Americans, in addition to warmer weather, Spring means tax season. Compiling a year’s worth of financial records can be a tedious and confusing task, but it can also be a time of reflection—to thoughtfully consider how we used our money, and where there might be some room for improvement. We’re also able to correct past foibles if necessary, such as making yearly tax-deductible retirement contributions to an individual retirement account for the previous year, something that too often falls by the wayside for many of us.

We know these same struggles exist for many people in Mexico, where adequately planning for retirement often doesn’t happen. Under the current system, Mexican workers will retire on just 40% of their current salary unless they actively make additional voluntary contributions to their individual accounts throughout their working years. This is widely known, and yet the vast majority of Mexicans aren’t taking this crucial step to improve their savings and overall future financial health.

With the support of the MetLife Foundation, we partnered with the Mexican retirement industry to try to solve these persistent—and nearly universal—problems.

On the heels of a report detailing our recent in-depth look at behavioral bottlenecks preventing retirement savings as well as proposed solutions to increase long-term savings in Mexico, we got to work with the Mexican retirement industry to turn our recommendations into testable behavioral interventions to be launched this year.

The first solution, launching at the end of this month, will be a re-design of the account statements sent to accountholders. The quarterly statement represents a key potential touch-point for impact, as it is sent to tens of millions of accountholders nationwide. Statements are issued by varying individual financial companies in different parts of Mexico, but we are able to make an impact as key information in all of them is regulated by CONSAR, the government’s retirement agency.

Our new account statement includes many tweaks designed to address the various behavioral challenges we found in our diagnosis of the Mexican retirement system, and encourages accountholders to take action and save today.

From our work in Mexico, we found that most people are unaware of the ‘health’ of their retirement savings accounts. If they’re unaware that there’s a problem with the rate at which they’re saving (or not saving), they’re unlikely to take action and get on track. This insight led us to the cornerstone of our new statement: a savings “thermometer” on the document that gives account holders specific real-time feedback on their retirement situations.

No matter where you are, retirement savings are easy to put off until tomorrow (or much later), and it’s easy to get overwhelmed thinking about how much you need to start saving. To combat this reality, our redesigned statement includes simple, intuitive graphics that demonstrate the importance of saving now instead of later, as well as personalized rules-of-thumb to help individuals determine how much to start saving now to reach their desired monthly spending amount in the future.

Finally, because we know from behavioral science that it’s critical to create a link between providing information and taking action, a key feature of the new statement is the inclusion of a set of clear, easy to follow ‘action steps’ for account holders. A simple checklist savings plan can be one of the most useful tools to prompt action and encourage follow-through. Pre-filling the first step in the checklist with a checkmark, as we did on the redesigned statement, helps show account holders they’re already on their way to saving more.

We’ll be testing these components next month in a large randomized controlled trial with over 120,000 account holders in Mexico, aiming to scale our most effective designs to all 54 million account holders in the Mexican retirement system. Stay tuned for results from this study and others in our comprehensive package of behavioral solutions designed to increase retirement savings in Mexico.

The post Making Small Changes to Save Big: Redesigning Mexican Retirement Account Statements appeared first on ideas42.

Why we’re wrong about lower income consumers, a three-part series

Products and services that help low- and moderate-income (LMI) consumers manage their day-to-day finances and improve their long-term financial health are a clear need that hasn’t yet been solved by mainstream or alternative financial providers. Why haven’t the needs of LMI consumers been met by the market? The latest research uncovers three pernicious myths that discourage innovation for the low- to moderate-income segment: that lower income consumers don’t want to save, are bad at managing their finances, and don’t have the money to pay for financial services.

In this series, a companion to our recent white paper, Reimagining Financial Inclusion, we’ll tackle each of these three myths in turn. If you haven’t read Parts 1 and 2 yet, you may want to begin there.

Part Three

Throughout this series, we’ve discovered that many common assumptions about LMI consumers do not hold true. While lower-income consumers often want to save money and are much better at managing their finances than is commonly believed, nevertheless, LMI households struggle to accumulate savings and repay debt. At first glance, it may seem hopeless to expect these consumers to be able to pay for financial services on top of other obligations. Yet this assumption overlooks the fact that lower-income consumers are already spending a sizeable chunk of their income on financial products and services.

MYTH #3: Lower income consumers don’t have the money to pay for financial services.

FACT: LMI consumers actually spend a significant amount of money on financial services, often more than what an average consumer might spend.

Underserved consumers spend a lot on financial services—to the tune of $138B in fees and interest in the aggregate in 2014.

Our latest estimate is that underbanked consumers spend an average of $1,100 per year just to juggle their basic finances outside the financial mainstream, or what amounts to about 5% of a $20,000 annual income.

Part of the reason consumers spend so much on financial management is a mismatch between what consumers need and what financial institutions—both regulated and alternative—can provide, resulting in a patchwork of partial solutions that’s expensive to manage in fees, time, and mental energy. LMI consumers pay to access services like check-cashing and money transfers that many middle- and upper-income consumers can access for free, and volatile income and expense streams combined with low savings buffers increase the risk of overdraft fees, non-sufficient funds fees, late fees, etc.

However, financial institutions that design products and services that take into account the realities of the lower-income context — the spikes and dips in income, the sudden expenses, the low savings — can help these consumers manage their finances in an affordable way. A single integrated product that provides credit to meet obligations when cash flows are low, automatically sets aside savings when cash flows are high, sends smart alerts and reminders about bills and low balances to free up mental bandwidth, and simplifies and reduces fees could meet the financial needs of LMI consumers and build financial health in the long-term. According to our estimates, such a product could be offered at a significantly lower price than what consumers spend on these functions today, saving consumers as much as $500 per year.

From the provider perspective, a product that automatically accumulates savings and replenishes credit could generate a sustainable profit by increasing deposit revenue and lowering credit risk and expected losses. We estimate that such a product could increase profitability by $120 per LMI consumer per year, a $1B+ opportunity for a large bank.

Learn more about the myths surrounding LMI consumers and new ideas for a better financial solution in our report, Reimagining Financial Inclusion.

The post Three Myths About the Underbanked, Part Three: Affordable Financial Management Is In Reach appeared first on ideas42.

The American higher education system is facing a completion crisis. While most U.S. high school graduates now enroll in college, many don’t complete their degree. The latest data shows that less than 60% of full time students finish four-year degrees within six years. This figure drops to 30% for two-year degree completion within three years. Students who begin but don’t finish college are in the worst position of all, bearing the costs of tuition and time without reaping the many rewards a degree offers, including the potential for nearly double lifetime earnings and halved unemployment.

Nudging for Success, a new report summarizing over two years of our work in the higher education space, demonstrates the promise of using behavioral science to improve college persistence and other student outcomes from pre-admission to post-graduation. Through 16 projects with 13 schools and postsecondary partners, we uncovered numerous subtle, often invisible barriers that hinder students’ progress at each step of their journey to a degree. These barriers—such as choosing loan amounts, registering for the right classes, or seeking academic support when needed —interact with and exacerbate larger structural issues, like high tuition rates, poor academic preparation, and the stress of balancing work with family obligations. Recognizing these behavioral barriers and designing targeted, cost-effective solutions can yield huge gains in the outcomes that matter most—including persistence, credits completed, GPA—in the road to graduation.

Using this behavioral approach to designing solutions, we increased first year retention by 10% among low-income, first generation, under-represented or other students most at risk of dropping out with a short video and reflective writing exercise along with monthly messages throughout the year. We increased scholarships and grants for continuing students by $236-643 per student with email reminders to file the FAFSA that increased early applications by 72%. Simplifying complex forms for income-based debt relief programs by using a novel document jacket increased the completion and return of the form by 48% for borrowers struggling to repay their student loans. These are just a few of the successes our work in Nudging for Success represents for the postsecondary landscape.

While it may be sobering to realize that low graduation rates are partly the result of a minor issue like an application form or an often unrecognized issue like a sense of belonging on campus, it is clear from our body of work that it is possible to make real, cost-effective changes that meaningfully impact students’ well-being and persistence using what we know from behavioral science. Our results demonstrate that we have a toolkit at our disposal with the potential to strengthen economic futures and transform the lives of millions of Americans. Our hope is that these and other behavioral insights will be used to improve the systems and structures that students face throughout their postsecondary experience so that all who begin college can more easily graduate and succeed.

We thank the Bill & Melinda Gates Foundation, Lumina Foundation, Citi Foundation, Michael & Susan Dell Foundation, and The Kresge Foundation for their generous support of this work. Read the full scope of our work applying behavioral science to postsecondary education in the Nudging for Success report here.

The post Tackling America’s College Completion Crisis with Behavioral Science appeared first on ideas42.

In the Learning Behavioral Design series, we share lessons from ideas42 projects that aim to teach practitioners how to apply our behavioral design methodology to their day-to-day work.

At the launch of ideas42 and JPMorgan Chase & Co.’s new immersive consumer finance initiative, guest speaker Tom Tosuksri wanted to answer one big question that was undoubtedly on the minds of all of our new partners in the room: “Will working with ideas42 make a lasting impact on my organization?”

Members from 11 leaders in the financial health field will get a behind-the-scenes introduction to applying our behavioral design methodology during our 18-month initiative The Behavioral Design Project for Promoting Financial Health. As Assistant Director of Research and Evaluation at Cleveland Housing Network (CHN) and a previous partner of ours, Tom was uniquely positioned to answer that question at the two-day kickoff event in New York City, which included intensive behavioral design training and talks from leading academics and practitioners in the field.

In a presentation entitled “A Case Study on Behavioral Science in Practice: What happens when nobody’s watching?” Tom told the story of partnering with ideas42 in 2013 as CHN’s representative for the BETA Project, a collaboration with the Corporation for Enterprise Development (CFED) which sought to increase asset-building organizations’ scale and impact by connecting high-capacity programs to innovative researchers and experts.

After the project ended, Tom used what he learned about behavioral design to diagnose the cause of low participation and high attrition rates in CHN’s Family Success Initiative, a five-year financial counseling program that helps families purchase homes.

Confident in the program’s potential and armed with his experience from the BETA Project, Tom and his colleagues examined the behavior of Cleveland residents who expressed interest in the program, but didn’t end up participating. They spoke with counselors, observed sessions between counselors and residents, and met with residents outside of their sessions.

“People told us they didn’t come to their session because they couldn’t get their documents organized,” Tom explained at the event. “And when people did come in, they brought documents in Ziplocs or pulled documents out of their purses.” In other words, residents struggled to stay organized because they lacked a system for storing and keeping track of documents—a small hassle with a big impact.

So Tom and his colleagues decided to distribute portfolios as a one-stop shop for important documents. Having successfully used portfolios to help residents in their home-buying classes, CHN hopes the portfolios will strengthen relationships between residents and counselors. With clear directions for where to put documents, milestone-tracking, and gamification elements that frame administrative tasks as pieces of a larger puzzle, Tom and his colleagues aim to empower residents throughout the five-year home-buying process and motivate them to keep coming back.

Critically, CHN is teaming up with University of North Carolina at Chapel Hill to run a rigorous study on the impact of these portfolios, helping them understand whether the portfolios help residents and, if so, why. To do so, they’ll distribute multiple versions of the portfolio and measure whether the versions differentially affect client engagement, participation and financial health.

Hearing about Tom’s experience using behavioral design (long after his work with ideas42 had concluded) helped our 11 new partners visualize their own potential impact. Tom’s story was especially helpful because he’s “in the trenches,” according to one partner. As our partners learn to integrate knowledge of their communities with tactics from behavioral economics and psychology, they will become powerful behavioral design practitioners in their own right.

The 11 organizations taking part in the Behavioral Design Project are pioneers in a growing community of innovative thinkers in financial health. This will help us cultivate a broad coalition of superb practitioners skilled in behavioral design. We hope that they, like Tom, will apply these tactics again and again to improve their clients’ lives.

Stay tuned for further updates on this initiative and our participants’ work. Click here for full details of the launch.

The post Learning Behavioral Design, Part One: What Happens When Nobody’s Watching? appeared first on ideas42.

This post originally appeared on The Rockefeller Foundation’s blog.

At first glance, an artist seeking to break stereotypes about hip-hop culture by analyzing rap lyrics may not have much in common with a researcher preparing mental health workers to support developing countries after a disaster.

And maybe it’s not immediately obvious what a cartoonist crafting a graphic novel version of the Kenyan constitution and a professor evaluating how and why environmental policies succeed or fail have to learn from one another’s work.

While the work described above may seem quite different on the surface, it actually all has a shared fundamental element: human behavior. And this shared element is what brought together 13 leading academics, artists, and practitioners from diverse fields, who are currently taking part in a thematic month on human behavior at The Rockefeller Foundation’s Bellagio Center.

The differences between the professional backgrounds and expertise of the participants make this unique residency incredibly exciting, but it’s their shared approach to tackling problems by incorporating the often unexpected ways real people behave that creates such potential for new connections and cross-disciplinary insights.

To help foster dynamic conversations, ideas42 is leading a number of sessions at the Bellagio Center in which residents will identify links between their work and collectively discuss how a widespread understanding of human behavior can help build resilience and more inclusive economies—The Rockefeller Foundation’s dual goals. ideas42 is driven to find unexpected solutions that have high potential for social impact, and this unique endeavor at the Bellagio Center is the perfect setting to spark novel insights among such a diverse group of people. We look forward to seeing the fruits of those connections emerge over the course of the month.

Two of the residents are working on projects to reach and engage youth through media they already enjoy—music and graphic novels. Tahir Hemphill aims to expose youth in American inner cities and from minority communities to the STEM (science, technology, engineering and math) fields through his Rap Research Lab, empowering them with skills in high demand by future employers, such as data mining and visualization. Godfrey Mwampembwa‘s Kenyan Constitution-turned-graphic-novel will teach students in Kenya about their country’s history, fight for independence, and new constitution in order to break barriers of marginalization and foster inclusiveness and civic engagement. Though their subject matter is quite different, it’s easy to imagine a fascinating conversation between them about each other’s efforts to reach and support young people.

And speaking of fascinating conversations, what about one between a visual artist exploring the relationship between human bodies and public spaces and a physician bringing new interventions to scale in the community health field? Both are changing how people’s roles within communities are perceived, but in very different ways. Colombian artist Ruby Rumié has photographed Afro-Colombian women over the age of 70 in order to tell their stories and preserve a heritage that may otherwise be forgotten. Founder and President of the Community Empowerment Lab in Uttar Pradesh, India, Vishwajeet Kumar aims to transform community health workers from passive “delivery” people into mediators of behavior change between health systems and families. While focused on communities on opposite sides of the world, both Rumié and Kumar are reimagining how their respective subjects can become more visible, active agents in their communities.

The thematic month residency also includes innovators working to adapt systems to the people they serve—rather than the other way around—in different areas of the world. Regina Hechanova Alampay is writing a book to help mental health workers learn about Southeast Asian culture before they arrive in the region in the aftermath of a disaster so they are better prepared to assist the people in need of their care. After Kim Thuy Seelinger‘s research found that survivors of sexual and gender-based violence in post-conflict and humanitarian settings rarely report these crimes to the police, but instead go through traditional justice systems, she is now studying how these traditional approaches can help transform formal justice systems into a more viable option for survivors.

The diversity of expertise and approach among the residents, when coupled with their common interest in human behavior, presents endless possibility for fruitful discussion and discovery. We are thrilled to bring change-makers together around behavioral science like never before and eager to share the meaningful ideas, insights, and solutions this group will create to address global challenges in the coming weeks.

The post More in Common Than You Think: Innovators from Diverse Fields Address Global Challenges appeared first on ideas42.

What does taking steps to use family planning look like to you?

Perhaps you think of visiting your doctor’s office. Depending on where you’re from, you may have a flashback to a lecture from high school health class. Or maybe you think of the first time you nervously bought condoms at a gas station, corner store, or market stall, rushing up and willing the transaction to be over as quickly as possible, hoping feverishly that no one you know would see you and that the shopping bag wouldn’t be too see-through.

The methods and specific images that come to mind might vary wildly depending on the person, but here’s something that is more likely to have a common answer: When you envision family planning, instead of options and how you might obtain them, have you ever thought about the people providing family planning products and services?

If not, you probably aren’t the only one. Most of us have some sort of underlying assumption that successfully obtaining and using family planning falls entirely on the individual or couple. That’s how most of us were introduced to family planning, after all—as users.

Two years ago, when the family planning team at ideas42 set out to identify and address challenges preventing people in Nepal from seeking family planning methods after an abortion, we had the same underlying assumption – that the barrier to uptake was related to clients and their partners. However, one of the benefits of behavioral science is it gives us a new lens through which to view tough problems, which sometimes leads to the discovery of surprising solutions. Our process also requires us to work openly with our partners, who are keenly aware of barriers in their programs. This helped us think a bit differently from the outset—we looked at all the decisions and actions related to family planning uptake for both clients and providers, distancing ourselves from our own underlying assumptions and biases.

Doing this made it clear that the biggest opportunity to increase usage of family planning methods in Nepal was to address overlooked, subtle obstacles that service providers face in the clinic setting—not clients. Frontiers in Public Health, a peer-reviewed journal, recently published a paper on the collaborative process ideas42 and Marie Stopes International-US undertook to de-bias ourselves, diagnose the situation, and design behavioral solutions.

Working with our partner Sunaulo Parivar Nepal, implementing partner of Marie Stopes International in Nepal, we found that providers had strong intrinsic motivation to provide family planning to women, and the skills to discuss options with their clients, but didn’t have the information necessary to prioritize their family planning-related roles among the dozens of other roles they have as women’s health service providers. We designed a poster that will be sent on a monthly basis to providers showing their clinic’s family planning uptake rates compared to a few similar clinics. The poster harnesses the power of social comparison – the theory that we look to others to gauge our performance. Social comparison interventions like this have been shown to be effective for reducing energy use and outdoor water consumption and increasing condom sales by hairdressers in Zambia.

As behavioral insights become more commonly used tools among practitioners, it is our hope that the insights are applied by public health program managers as they design and tweak new and existing programs to make them even more effective for the people they serve.

The post Examining Assumptions About Family Planning Use appeared first on ideas42.

Saving for retirement can feel like giving money to a stranger. Forgoing money in the present to benefit the person we will eventually become—our “future self”—is often a difficult and ungratifying experience. Because of this and other behavioral barriers like the ones we uncovered in Mexico, it should come as no surprise that most people are not prepared for their retirement.

A healthy retirement is generally thought to be about 70% of a worker’s monthly salary, but Mexicans in the current pension system stand to receive roughly half the recommended amount, which has led to a high level of elderly poverty. With support from the Metlife Foundation, we are developing five interventions to help increase workers’ voluntary retirement savings, ranging from lighter-touch interventions like an improved account statement and text messaging reminders to more resource-intensive ones like changes in the protocols used by retirement account sales staff, known as promoters.

We’ll leverage the promoters’ personal interactions with workers to encourage take-up and ongoing use of automatic savings. Currently, these promoters seek to convince clients to transfer to their Afore—a pension fund administrator—from one of the other Afores. This transfer process presents a unique opportunity for a behavioral intervention as it often involves multiple phone calls and face-to-face conversations between pension clients and promoters.

To design effectively for this channel, we interviewed multiple promoters and observed their interactions with Mexican workers in client sales pitch situations. We identified three contextual features of their work with important implications for increasing take-up of automatic savings.

First, promoters are paid high commissions for transfers based on the account balance of the worker they transfer. Trying to encourage promoters to speak to workers about automatic savings, a service that won’t earn them as much commission, is likely to fail if it appears to compete with time spent on encouraging transfers. Fortunately, it’s not all about commission with promoters. We found that many are motivated and excited to help everyday workers save more for their retirement, and designing for this altruism could be an effective way promote to automatic savings.

Second, the technique that each of the promoters uses to encourage workers to transfer or sign up for automatic savings varies greatly. Convincing someone to switch companies or getting a worker to agree to talk to a promoter in the first place takes a personal touch, and we found that everyone has their own unique style for accomplishing this. This is an asset, so a design intervention shouldn’t restrict the individual techniques of the promoters. On the other hand, if the intervention is too flexible and subject to human differences, the core message of the behavioral design could be diluted or lost before reaching the end user, the worker. Striking this balance will be essential to creating an effective design in the promoter channel.

Finally, we observed that the promoters selectively mention automatic savings, not across the board. In a world of perfect information, promoters would already know which workers to target and which sales tactics to use. In reality, they don’t have this luxury and are constantly making informed guesses about clients: That’s a nice watch he’s wearing… this transfer is probably worth my time. Or She works in finance… I should probably talk about our financial returns. For an intervention that seeks to reach as many workers as possible, guesses can be detrimental: He’s 28, he probably doesn’t care about automatic savings yet. Paradoxically, promoters might exclude workers that appear to have fewer resources, yet it is exactly those workers who need those savings most. To have the broadest impact, our intervention will need to be designed in a way to ensure delivery to every single person the promoter meets.

These insights will help build the groundwork to navigate our design process. Through our understanding of the retirement savings landscape in Mexico, feedback from the retirement industry and academics, and many design iterations, we hope to arrive at a solution that dramatically improves the uptake of automatic retirement savings (and reduces poverty later in life) in Mexico. Stay tuned for further details about this intervention and its results.

The post Designing Better Retirement in Mexico appeared first on ideas42.

This post originally appeared on The Rockefeller Foundation’s blog.

During the last three weeks, I have had the pleasure of leading sessions during the thematic month on human behavior at The Rockefeller Foundation Bellagio Center, observing as the residents share their perspectives and question everything, including each other’s assumptions, to uncovering surprising connections and new problem-solving approaches. I am thrilled to see camaraderie develop among the 13 academics, artists, and practitioners from diverse fields gathered here in Lake Como, Italy to work on their individual innovative projects and collectively apply a human behavior lens to pressing challenges across the globe.

At any given moment animated debate springs up amongst the residents: from fixing public schools in the U.S., to improving neonatal care for India’s poorest families, to using data to foster social cohesion. And new insights emerge: residents have uncovered unexpected parallels between politics in Kenya, India, and the United States. An artist was struck by the aesthetic possibilities presented by a behavioral economist’s trust experiments in marginalized, vulnerable communities; and a researcher of post-catastrophe resilience mulled over the possibility of using these experiments as a way to stimulate recovery from natural disasters. Enthusiasm is high as the discussions of the day often continue over dinner and then late into the night.

I am most encouraged by the impact the group discussions have had on participants’ individual projects—demonstrating the promise of a conversation to spark new ideas and enhance understanding. Juan-Camilo Cárdenas, an experimental economist from Colombia, likened this residency experience to the coming together of many chefs, each concerned with food and cooking in his or her own way. As he explained it, everyone approaches cooking with a different set of techniques, ingredients, and tools. Some may be more interested in the science of cooking, some in the aesthetics, and some in the nutritional value—but each has expertise to share. Exchanging that expertise unleashes rich new flavors and ultimately enhances each person’s cooking. Already Cárdenas is beginning to see new ingredients to inform his work with fishing communities in Baru, Colombia.

For some residents, these new ingredients are already being used to update existing recipes. Vishwajeet Kumar recently had a late-night call with his team in India to tell them about the ideas that have come out of discussing his work at the Bellagio Center. Kumar leads a remarkable effort to improve maternal and child health by increasing the use of “Kangaroo Mother Care” (KMC), a profoundly simple method of care for preterm infants in which a mother carries her baby with skin-to-skin contact. He has already asked his team to explore the possibility of testing and implementing new behaviorally-informed ideas he’s garnered from the residency to help spread this under-utilized technique. For example, he’s considering using the concept of ‘social proof,’ where seeing others like oneself do something enhances its acceptability, or addressing long-held perceptions of what incubators do to make KMC the default method of care rather than an alternative.

The Rockefeller Foundation Bellagio Center has been a remarkable catalyst for thought, discussion, analysis, and insight over the past weeks. The diversity of the group’s expertise together with the serenity of the location has unlocked a truly collaborative environment amongst individuals who’ve only known each other for a few weeks as they explore ways to apply behavioral science to their problem solving approaches. As the thematic month comes to a close, I am energized and excited about the individual projects and collective body of work to come.

The post Bellagio Center Residents Question Everything to Surface New Ideas appeared first on ideas42.

Since her husband passed away a few years ago, Marwah has taken care of her family’s cocoa farm all by herself. She is motivated by a promise she and her husband made to help finance their youngest son’s college education. But like many who manage small cocoa farms in Indonesia, Marwah struggles to save money. “Many of us live with no savings,” she laments, making it hard for farmers to improve their livelihoods and achieve goals such as supporting their kids through college.

In our initial work, ideas42 found that of 70,000 Indonesian farmers surveyed, 98% wanted to save money, yet only 50% were actually saving (often very little). What is it that makes it hard for farmers to save? We partnered with the development agency Swisscontact to find out—and develop an intervention to help farmers overcome the obstacles.

We started in July 2016. Between a poor rainy season and a predictable spike in spending around the Ramadan holiday, finding money to put away should have been more challenging than ever. Despite the less-than-ideal conditions for saving money, the farmers we worked with—including Marwah—were surprised to see their savings accounts grow. For some, it was their first experience using a bank or even their first time saving money.

So how does it work?

First, with our intervention, the farmers set concrete goals upon opening their savings accounts. We know from behavioral science that people are much more likely to save money for tomorrow when they have a specific goal in mind and a plan to achieve it, and less likely to spend money on small incidental expenses. Indeed, one key inhibitor to saving we identified was that much of the farmers’ “overspending” was a series of small, incremental purchases such as the odd pack of cigarettes, coffee outside the home, and snacks for children on market days. These expenses felt insignificant to farmers at the time of purchase, but added up over months and years to meaningful amounts. When we asked some farmers to add up how much they spent on cigarettes in an entire year, they would often start laughing at themselves, astonished by how much money they actually spent on cigarettes alone. Setting goals is an integral step to forgoing spending today for the sake of tomorrow.

Second, our intervention includes an opportunity for farmers to make a deposit every time they sell cocoa beans to traders – the point when they have the most cash on hand. Behavioral science tells us that people are more likely to save at times when they feel financially flush, so making it easy to save at the right time in their financial cycle can encourage saving.

We found that another factor standing in the way of savings was farmers “saving after spending,” meaning they would save whatever was left after all expenses were paid (often little or nothing). Saving first is hard because it feels like “the money is not working for [them]” – literally that it wasn’t doing anything, but sitting there, unused – which can be particularly painful when farmers have immediate needs. But as investor Warren Buffet famously put it, “Don’t save what is left after spending, but spend what is left after saving.” Having the option to immediately set aside funds allows farmers to do just that.

The intervention in Indonesia is now three months in and farmers are already reporting their progress. One farmer, Sariati, initially set a goal to save roughly $150 USD for new cocoa seedlings, and has already reported putting away $30 USD towards her investment. Another farmer, Hatija, had a similar goal to replant her cocoa plot, and has managed to save $45 USD. These farmers and others have noted that this intervention has helped reduce their spending on “unnecessary items,” and increased their confidence in their own ability to save—especially since they did so during poor seasonal conditions and a holiday month.

As for Marwah, her cocoa production has been relatively stable, and she anticipates meeting her goal of saving enough money for her son’s education by the end of the season. She says the program “really makes sense.” It has helped her take one concrete step toward fulfilling the promise she made to her husband and her son, to help her youngest through college.

We look forward to following up with the farmers at the end of the intervention period early next year to see how much progress they’ve made in saving for the future.

The post Cocoa Farmers Grow Their Savings appeared first on ideas42.

Education has long been touted as a ticket out of poverty, and a well-educated workforce is the foundation of a competitive economy. So it’s easy to think education advocates can solve a lot of problems by convincing high school students to go to college—but the data tells us most high-schoolers are already convinced. In fact, 93% of them aspire to go to college.

If that’s the case, then why don’t more Americans hold college degrees?

Diving deeper into the data hints at the long and winding journey to college graduation: of the students who plan to go to college about 10% don’t apply, and another 10-40% are accepted but don’t enroll. And of the students who do enroll in college, only about half complete their degree.

Applying to, enrolling in, and completing college is an enormous undertaking, and more students drop out of the process at each stage. But using what we know from behavioral science can help students achieve their goals. Our recent report on the college completion crisis, Nudging for Success, in which we shared results of behavioral interventions that meaningfully impacted students’ well-being and persistence, is an introduction to our work applying behavioral science to the long journey to a degree.

Following the release of Nudging for Success, we’re excited to share a new postsecondary education project in which we looked at the complex pathway to college and graduation from the student’s perspective.

After interviewing students, parents, and education experts, and reviewing comprehensive research on higher education, we created 19 new recommendations to address potential behavioral bottlenecks and help students—particularly low-income and underrepresented students—successfully navigate applying for and selecting a school and beyond.

These recommendations, developed with the generous support of the Bill & Melinda Gates Foundation, are now available in Mapping Critical Student Decisions Through College. This work recognizes that getting to graduation day involves a series of complex choices that students need help navigating.

For example, automatically signing up students to take the SAT or ACT with the option to opt-out (rather than requiring them to opt-in) can increase enrollment in 4-year colleges by 10% among low-income and first-generation students.

Another often-misunderstood issue is school selection. Many digital tools exist where users can filter options based on location, academics, average test scores, and more to aid their search for schools. While these tools are useful in narrowing their search, we found that the way choices are presented to students typically undervalues school quality and can lead to a poor academic match. Selective schools tend to offer better financial aid packages, reducing the debt load on students, and low-income, high-achieving students at selective schools graduate at higher rates than nonselective schools. We suggest several ways that the most popular college list-building sites can improve their functionality to best serve the needs of low-income students—for instance, by displaying average net price instead of ‘sticker’ price and by helping students narrow the field of choice based on academic criteria before moving on to their other personal preferences.

We also examined the context that makes building good financial health challenging for low-income students. Financial plan-making along with reminders to prompt follow-through can reduce student stress around financial health, which in turn creates more mental bandwidth for academics. We recommend integrating budgeting, saving, reminders, and other behavioral elements into students’ financial lives from the very start.

You can learn more about our 19 designs and the behavioral barriers that each of them can help tackle in the full report and a brief summarizing our insights.

The post Clearing the Path to College appeared first on ideas42.

With the ideas42 Seminar Series, we invite leading scholars to share their insights and what inspires their exploration into human behavior.

Our New York office was pleased to host William Elliott of The University of Kansas this week. William founded of the Center on Assets, Education, and Inclusion (AEDI) in KU’s School of Social Welfare. He is a leading researcher in the fields of children’s savings and college debt. However, his research interests are broadly focused on public policies related to issues of economic inequality and social development. After giving a talk to the ideas42 team, William was kind enough to share some of his thoughts on behavioral science:

What drew you to study finance in education?

I really just wanted to find a way to make poor people’s lives better. I grew up poor and saw that success was not all about the amount of effort and ability people have, that access to institutional resources plays a key role in why one person succeeds and another does not. It is not a total sum game, however, where only institutions matter, but they play an important role in success as well as failure. I wanted to figure out how to make institutions more equitable, so that effort and ability would truly determine outcomes.

Tell us about your work in studying student or family behavior in this realm.

My work is about how institutions and the resources they provide augment human effort and ability creating inequity in society. I have two basic theories about the world. First, most people are of average intelligence. In statistics we learn about the bell curve, that data are normally distributed with only a few outliers at either end of the curve. From this perspective, minus the exceptions at either end, the patterns we currently see with regard to children’s academic achievement or economic success, some groups doing really well or others doing really bad is the result of inequitable institutions and to some degree individual effort.

While I cannot name the second theory, I can describe it. Galileo, a very intelligent man by all accounts, spent most of his life figuring out the world was round–something you and I grow up knowing. Others spent their lives trying to come up with how to fly or how to build a computer. These discoveries today are all taken for granted and you could simply google them; you would not have to spend years coming up with the knowledge. The point is, so much of what we know and can know is about where we start off and the resources we have access to, what knowledge we are given. This is increasingly the case in the highly technical and specialized world we live in. Denying people access to basic resources (both knowledge and material) puts them behind, it leaves them unable to compete regardless of their effort and ability. So, when we see systematic patterns where one group is failing and another succeeding, this should raise concern about the equity of our institutions and how these institutions are affecting behavior.

What’s one of the most surprising discoveries about human behavior you’ve found?

You can have two children from the same family and one will work really hard and the other will not. While institutions are extremely important, and society must strive to build equitable institutions, they do not fully explain behavior either, and, in fact, we cannot know which child born will have extreme levels of effort and which will not. Therefore, we cannot say because one child is born into a middle class family and another to a poor family that the middle class child will have more effort. What I draw from this is that society must focus on making institutions equitable and individuals must focus on raising their level of effort and investing in their human capital (i.e., ability). Each is important in determining success; policy likely only can do one well, however, and that is change institutions.

Have you learned anything about human behavior and decision making that has changed the way you think or work?

Not all people are going to exhibit the same level of effort. Some people are going to work much harder than other people, so there will always be differences in who succeeds and who fails. But these patterns will not be systematic in an environment where institutions respond the same to everyone’s use of effort and ability, where institutions provide everyone an equal starting point. Therefore, what I am primarily concerned with is the “real” opportunities people have in life, not the outcomes they achieve.

The post ideas42 Seminar Series: A Talk with William Elliott appeared first on ideas42.

For millions of people around the world, the consequences of inadequate retirement savings are devastating. The problem is widespread even in countries with formal systems of mandatory contributions to individual retirement accounts. In Mexico, these mandatory contributions amount to less than 40% of a worker’s salary during retirement, and few people make the additional (voluntary) contributions that would keep them out of poverty after retirement.

Saving for retirement simply isn’t on most people’s radar. Less than half of one percent of people with active retirement accounts in Mexico make voluntary contributions. Additionally, more than half of the labor force works outside the formal sector, making no mandatory contributions and effectively saving zero for their retirement.

At ideas42, we identified this as an area where behavioral science could have tremendous impact. A year ago, we released our initial insights report on retirement savings in Mexico. Since then, our work has progressed tremendously.

In the report, we identified key behavioral barriers that keep people from following through on their intention to save for retirement. One challenge people face is a future that seems abstract and quite distant, making it hard to plan for. Another is the negative feeling incited by retirement savings, which is perceived as “giving up” money in the present, even if it’s beneficial in the long run.

In the last few months, thanks to support from the MetLife Foundation, we launched several interventions that are designed to address the behavioral bottlenecks we identified in Mexico.

We redesigned the quarterly statement sent to the 53 million account holders in the Mexican public retirement system to include an easy-to-understand savings “thermometer,” along with clear action steps and a checklist to help people get on track. We conducted a randomized controlled trial to test the impact of the new statement on contributions. We expect our results to be applicable across the retirement planning industry.

After the redesigned account statements were sent out, we launched a text messaging campaign to prompt account holders to explore their statements. The series of text messages put retirement savings in familiar context (for example, connecting its benefits to family well-being) and provided tips about goal-setting and the power of saving small amounts regularly to begin positive savings habits. Importantly, each message also included a simple list of next steps for making a voluntary contribution.

Our work applying behavioral design to the nationwide retirement system by using simple but effective changes is a big step forward. Because saving for retirement is a “new” behavior in Mexico, these first steps—making progress salient to account holders, providing easy, actionable steps, and sending reminders—were critical to laying the groundwork for our upcoming efforts to continue making saving for retirement a part of life for millions of people.

Launching in the beginning of 2017, our new interventions will also have behaviorally-informed timing on their side. The “fresh start” effect, or the tendency take on our goals around noticeable milestones, like birthdays and the New Year, is a great example of how understanding context can play a crucial role in designing effective solutions. Stay tuned as we seek to better understand savings behavior and design solutions to help people follow through on their savings resolutions in Mexico and elsewhere in Latin America.

The post One Year Later: Behavioral Design in the Mexican Retirement System appeared first on ideas42.

This post originally appeared on Next Billion.

Norma has a small store in the Bago City neighborhood of central Philippines. In the packed interior of her store, Norma sells a variety of household items such as coffee, sugar, chips, bread, eggs, soft drinks, soaps and more. She has big plans for her business – she wants “to expand (her) retail store into a big grocery shop.”

Norma’s high aspirations are not uncommon among the microentrepreneurs the ideas42 team interviewed in the Philippines and India. And like their counterparts around the developing world, these entrepreneurs struggle to manage and grow their businesses and reach their goals.

Microentrepreneurs have the potential to be the engine of growth for developing countries by creating jobs, bringing valuable products and services to communities, and spurring economic expansion. With an estimated 400 million micro, small and medium enterprises around the emerging world, successful small businesses could improve the livelihoods of millions of families.

Despite a huge expansion in microfinance, why has this promise not yet been realized? Because access to finance alone does not make a business successful.

It is crucial for microentrepreneurs to know how to run their businesses correctly. That is why effective business and financial management training for micro-entrepreneurs matters. Classroom-based financial education courses have traditionally been used as a way to bridge this skills gap. Despite their popularity, such trainings have shown limited impact on financial behaviors of microentrepreneurs or the actual performance of their businesses. Small lapses in decision-making and behavior are the culprit: Did micro-entrepreneurs show up for the training? Did they understand how to implement the business advice being taught? Did they follow through on the recommendations? If the answer to any of these questions is “no,” it becomes impossible for micro-entrepreneurs to optimally use the training advice to improve their financial management practices.

ideas42’s Financial Heuristics, a behaviorally designed financial management training, offers an alternative by focusing precisely on closing the intention-action gap that traditional financial education training programs have failed to bridge. From a behavioral perspective, increased knowledge alone does not always translate into improved decisions or behaviors. Our innovative approach simplifies financial management training into easy-to-remember and easy-to-adopt heuristics, or simple rules of thumb. We tested the effectiveness of such classroom-based heuristics training with a randomized controlled trial in the Dominican Republic and found that it not only improved microentrepreneurs’ financial and business management practices, but also increased their business revenues compared to the control group that received traditional financial literacy training.

Our initial work demonstrated the benefits of using heuristics in financial management, but classroom-based training is costly and requires a major time commitment from busy microentrepreneurs. So the question remained: How could we deliver these heuristics to millions of microentrepreneurs like Norma effectively as well as economically?

We believe the answer lies in the use of technology. ideas42’s next innovation on heuristics-based training leverages mobile technology – through an Interactive Voice Response (IVR) based platform – to deliver the training in a cost-effective, scalable way that bypasses the need for a classroom altogether.

In the second version of our behavioral design, implemented in India, we partnered with IFMR Lead to adapt the heuristics-based curriculum for mobile phones and sent weekly training calls on microentrepreneurs’ mobile phones at their requested times.* Call pickup rates were high, averaging 83 percent. However, the average listenership rate, 48 percent, indicated that a fair amount of participants who answered the weekly training call only listened to a fraction of the three-minute automated voice message. We thus learned that merely using technology to send a standard IVR push call is not sufficient to ensure the success of the training. What we needed was behavioral design to improve the technology solution as well.

To improve pickup and listenership we developed an enhanced technology-based solution in partnership with IFMR Lead, IPA and engageSPARK that is currently being tested in India and the Philippines as version three of our behavioral design. Through qualitative interviews with our microfinance institutional partner Janalakshmi’s clients who had been part of the first IVR-based iteration, we learned that many clients had not thought through when would be best to request their training calls, and thus they tended to be busy at their requested call times. Also, even though clients had access to a free missed call service to listen to previous messages, its complex setup made it hard to navigate the system and listen to training messages at clients’ own convenience. Based on this feedback, we honed in on two ways to improve usage rates: push calls to phones at times of the week when clients are less likely to be busy, and simplify the missed call service so it is easier to navigate to listen to the previous messages.

Through our interviews with the technology platform managers of the first IVR-based iteration, we discovered that they scheduled training calls manually and that real-time performance analysis and troubleshooting were very cumbersome because the platform didn’t provide real-time user activity reports. As a result, we worked with our current technology partner, engageSPARK, to automate call scheduling (including automatic follow-ups if participants did not pick up on the first try) and produce engagement reports with real-time access to key data such as call pickup rates and average time spent listening to messages.

Following the addition of these design changes, initial results are promising and demonstrate positive trends in client engagement with the mobile phone-based heuristics training. We believe that behavioral design has the power to unlock the potential of microentrepreneurs, markedly improve their financial management practices and business outcomes, and in turn lead to the financial well-being of their families. Stay tuned for more results in fall 2017 when we will know the full impact of our improved Financial Heuristics training design on microentrepreneurs’ financial practices and business outcomes. We look forward to seeing how heuristics-based training can help entrepreneurs like Norma achieve their dreams.

*Note: This phase of the study was supported by the Citi IPA Financial Capability Research Fund, within IPA’s Financial Inclusion Program, which supports research on innovative products and programs that aim to improve the financial capability of low-income people in developing countries.

The post How Technology Can Provide Microentrepreneurs With Simple – and Much-Needed – Rules of Thumb appeared first on ideas42.

Youth violence is one of the most pressing social problems facing cities across the United States. Unfortunately, once youth become involved with the criminal justice system, they can get caught cycling in and out of custody, sometimes for the rest of their lives. In the state of Illinois, for example, almost 60 percent of youth who were released from detention in 2012 had returned to a detention facility within three years. This cycle of recidivism has consequences for their development and can deprive young people of opportunities for healthy relationships with family and friends, access to education, and stable employment. It is also very regressive, as the recidivism cycle’s negative impacts are often concentrated in the country’s most economically marginalized and racially segregated communities.

As the incarceration rate has skyrocketed since the 1970s, sparking growing concerns about both the social and economic harms of having so many people behind bars, it has become even more critical that we find and implement programming that can help young people stay out once they get out.

So when the Cook County Juvenile Temporary Detention Center (JTDC) introduced cognitive behavioral therapy (CBT) to the youth in its facility and a research team from the University of Chicago Crime Lab found that it dramatically reduced a young person’s chance of being readmitted into detention after their release, we wanted to find ways to share this promising program with other practitioners who work with justice-involved youth. Because CBT programs—and results—can vary across states and facilities, we first set out to understand what made this CBT program so effective.

ideas42 and the UChicago Crime Lab, with support from The Laura and John Arnold Foundation, worked with the JTDC staff to develop an understanding of the most effective parts of their curriculum—and how to deliver it in a detention setting. We adapted key lessons from the JTDC’s CBT workbooks, and then incorporated our own findings from conversations with JTDC staff and other CBT experts, as well as what we know from behavioral science, to create the Cognitive Behavioral Therapy 2.0 Curriculum and User’s Manual.

These free resources, available to download on our website, focus on curriculum that helps youth to slow down their thinking in the kinds of high-stakes situations where they might otherwise act automatically—or even impulsively. It guides them to slow down their thinking processes, consider what biases may be built into their responses, and shift their decision-making strategies in certain contexts toward more reflective ones. We also provide hands-on, engaging delivery tips to optimize the curriculum’s impact. Our aim is that these resources will help individuals who work with justice-involved youth design and deliver effective programming.

By sharing this evidence-based approach, which was the recipient of the 2016 Service and Advocacy for Youth Award from the National Partnership for Juvenile Services, we hope to help practitioners nationwide support youth development, and ultimately reduce rates of recidivism. As one JTDC staff member told the UChicago Crime Lab research team, “If I could give [residents] back just ten minutes of their lives, most of them wouldn’t be here.” This wish highlights the potential promise of CBT; when facilitators teach young people to effectively apply CBT methods to real-life situations, they have the power to give youth the time they need to slow down their thinking—before a quick, automatic decision saddles them with lifelong consequences.

The post CBT 2.0: A Behavioral Approach to Reducing Recidivism Among Youth appeared first on ideas42.

Many of us are aware of the usefulness of “rainy day” savings—what we set aside for emergencies and other unforeseen expenses that creep up on us all. Those savings are in addition to those we accumulate to accomplish larger goals we may have like buying a house or planning for retirement.

But understanding the importance of having access to any kind of savings, including emergency funds, is often not enough to lead people to actually save. There are a number of well-documented behavioral reasons for this. Present bias can cause us to favor spending in the present over saving for the future; then there is the hassle of dealing with unfamiliar or burdensome banking procedures that can impede beneficial financial decisions, even when the future rewards of saving are substantial.

With the need to increase savings very much in mind, and with support from the MetLife Foundation, ideas42 is using behavioral science to develop a variety of interventions to improve financial health in Chile.

Savings in Chile are particularly interesting. At first glance it may appear that a sizable portion of Chile’s population is already adept at saving money. A 2016 representative survey of Chileans found that 74% of households have been saving over the last year, a rate 14 percentage points higher than the Organization for Economic Co-operation and Development (OECD) average. But we also know that around half of all Chilean households face problems in covering expenses. Looking closer at the composition of their savings shows that while households saved, on average, nearly 10% of their incomes, 85% of all the savings are mandatory and specifically designated for retirement. Of course, long-term retirement investments are important, but they cannot be used to manage day-to-day financial needs. Moreover, the remaining 15% of the savings pool, which is not dedicated to retirement, comes primarily from the higher-income segments of the population—those less likely to struggle with expenses.

Short-term savings are incredibly important for lower-income populations as they are more likely to experience financial shocks, like temporary layoffs and unforeseen expenses, and they have greater uncertainty about their income. Easily accessible savings can help develop the capacity to deal with these shocks more effectively, as well as avoid hard-to-break cycles of over-indebtedness.

Today, low-income Chileans have access to financial services through CajaVecina, a correspondent bank for BancoEstado and the largest network of its kind in Chile. As the bank’s most extensive in-person channel, CajaVecina provides point-of-service devices to small shops throughout the country, in order to offer easy access to diverse financial services, including withdrawals, payment of services, transfers and deposits. As we have found in other savings contexts, however, simply having access to financial services does not guarantee that people will actually use them. Currently, only 12% of CajaVecina users utilize their savings accounts. In order to address this issue, we have partnered with CajaVecina with the aim of improving the short-term savings behavior of their users, 90% of whom have monthly incomes under $650.

We know that the barriers to saving worldwide are not only systemic, but also behavioral in nature. Thus, in the coming months, we will be interviewing CajaVecina users and analyzing transaction data to better understand what impedes their savings behavior and what can facilitate it. We hope to develop a series of projects geared toward increasing their savings, thereby strengthening their financial positions in both the short and long term.

The post Boost Savings in Chile: We’re Banking on Behavioral Science appeared first on ideas42.

As an unabashed finance nerd, I love a good tip about how to improve my financial health. I always look forward to April, Financial Literacy Month, for a flood of recommendations. Managing personal finances is hard, and recent research suggests that a huge proportion of Americans, not just those at the lower end of the income spectrum, could stand to improve their financial lives.

But even the best financial tip can be hard to put into practice. At ideas42, we know from the research world that information alone is often not enough to help people move from intention to action. It’s critical that financial providers also design products and services with financial health—and real human behavior—in mind. That’s why this Financial Literacy Month, we’re putting forward some behavioral literacy tips for financial institutions and professionals.

1. People are more focused on today’s finances than tomorrow’s.

Those of us who work in finance spend much of our time thinking about financial issues. Financial planning is important, but for most people, it’s just a small sliver of day-to-day life. Humans have limited attention that tends to be consumed by getting the kids to school or meeting deadlines at work, among other responsibilities. Understandably, people prioritize their urgent needs over longer-term ones. Because of present bias, activities that pay off in the distant future but have small costs today (like planning for retirement) can be easily deprioritized. Tasks that are complex and don’t have a concrete deadline are especially easy to procrastinate on until tomorrow. Promising behavioral tactics to solve this problem aim to meet people where they are and help them put out fires in the present, form connections from their present self to their future self, and free up mental bandwidth while creating a moment for concrete financial planning.

2. Bankers think in terms of financial accounts; people think in terms of mental accounts.

Because finances can be so complex, people create mental shortcuts to simplify their decision-making. We tend to assign labels, or mental accounts, to our spending based on the origin of the money and/or categories of spending (food, clothes, rent, etc.). Most financial products don’t align with this tendency. Account statements and online banking portals typically display account balances, transaction activity, and little more. Unfortunately, today’s balance doesn’t account for upcoming needs or help plan for unexpected expenses that (predictably) arise. Budgeting tools fall on the opposite end of the spectrum by providing way too many nuanced budget categories to track and monitor, rather than a clear sense of how much is left over for spending today. This information overload leaves people disengaged and without a clear step forward.

3. People may come up with ways to design for their own tendencies if financial products come up short.

Despite the complexity, most people have good intentions when it comes to managing their money. In fact, some people are aware of their own behavioral tendencies and concoct smart ways to design for themselves, like managing their self-control in the face of temptation. Consider some of the workarounds used to inhibit spending: people give their credit card to a friend or family member, others put it in a glass of water in the freezer, others may never activate a credit card to prevent its use. At ideas42, we see this desire for self-imposed commitment devices across many projects in consumer finance. For example, my colleague Abi Warren described giving savings pouches to people participating in a Madagascar cash transfer program as a way to separate savings from the rest of their money. She said the team heard a strange request: Do you have anything that’s harder for me to open? While it may seem like customers prioritize flexibility and freedom, there is clear demand for smart behavioral design that helps people meet their financial goals.

The way financial products and programs are designed goes a long way toward promoting financial health, which is why providers should play a central role in furthering the ideals of Financial Literacy Month. The real impact comes from how financial institutions and professionals actually embrace and embed these behavioral principles within their services. The good news is that better financial health not only benefits consumers, but the potential for reducing credit risk and building deposit balances also creates positive outcomes for financial providers.

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Saving money is important not only for long-term needs like retirement but also for expenses in the short term. This is because incomes and expenses are not always constant, and people can’t necessarily predict when they will need more cash. A reliable savings cushion is critical when people encounter large, unexpected costs or lose their job—financial “low points” that could happen to anyone at some time during their lives. Unfortunately, people with lower incomes who need savings the most often face greater challenges in the endeavor to set aside funds because they are more likely to have volatile incomes and experience financial setbacks.

As we’ve covered in an earlier blog post, Chileans are saving money already, but the funds are predominantly set aside for their retirement. Nearly half of people don’t have enough money saved to cover sudden expenses that fall outside regular monthly needs. Savings can help weather these unexpected financial shocks.

We’ve been working with CajaVecina, a widely accessible financial institution in Chile, to find out why. The first step was to interview 30 people of varying age, gender, socioeconomic status, and geographic zone. Behavioral barriers to increasing and maintaining customers’ savings came to light in their responses.

One of the key barriers we discovered is that many CajaVecina users tend to underestimate the probability of experiencing financial shocks. When asked if they considered themselves at a low, medium, or high risk of facing a financial difficulty, over 60% of interviewees said medium. Yet 60% also considered the average Chilean to be at a high risk of experiencing financial distress. Simply put, they think Chileans generally—but not they themselves—are at risk of facing a tough financial situation. The tendency for people to think they are less likely than others to experience something negative is called optimism bias. Of course, people are unlikely to save money for something that they don’t believe will happen. In fact, interviewees who had previously experienced a financially constrained situation made more effort to save emergency funds than those who had not. Their earlier experience presumably made them less optimistic about their future and thus more likely to save.

But even if CajaVecina customers decided to save for a rainy day, they might hit a second barrier we discovered in our interviews, which is the sheer complexity of financial decisions and very little guidance on how to navigate them.

Consider one important aspect of the savings equation: how much to save? Accurately answering that question might necessitate creating a budget and tracking earnings, spending, and what’s left on a monthly basis. This takes time, motivation, and some financial expertise. But the average person doesn’t have those things to dedicate to financial planning, which is perhaps why the majority of interviewees expressed generalized savings goals, such as 5%, 10%, or 20% of income or 10,000, 50,000, or 200,000 Chilean pesos per month. Their responses reflect not only a documented preference for round numbers (that may or may not be ideal), but also more importantly the fact that their goals are unlikely to be rooted in specific reasoning.

Again, most people don’t have the time or expertise to pinpoint a perfect financial plan and follow through on it, but heuristics, or simple rules of thumb, can help guide them in the right direction and get them started saving right away (better than procrastinating on finding a perfect solution). Examples of financial rules of thumb are Elizabeth Warren’s 50/30/20 rule for budgeting or the common advice to set aside 3 months’ salary as an emergency fund. When we asked our 30 interviewees whether they had basic rules or instructions like these, most of them struggled to come up with a response. After giving it some thought, half of them responded, but mainly with admonitions to be organized and disciplined with expenditures (“saving is more about having willpower,” “avoid unnecessary expenses”), rather than any concrete guidelines (“don’t spend more than 50% of your salary,” “cover your basic needs and save the rest”). This suggests that the financial advice they have received has been vague, which makes acting on an intention to save hard.

Optimism bias and a lack of heuristics are just the beginning of the potential barriers we could address to help people establish more emergency funds. In the coming months, we will continue to work with CajaVecina to learn about Chileans’ banking behaviors by analyzing anonymous transaction data. Equipped with knowledge about specific barriers to tucking away money in this context—and behavioral insights for overcoming them—we will next design interventions to help CajaVecina users increase (and sustain) their savings.

The post What’s Stopping Chileans from Saving appeared first on ideas42.