A new study by business and technology services company Cognizant sheds light on the many different emotional connections we have with money.
The results of How Financial Institutions Can Capitalize on the Emotions of Money, conducted with social science consultancy ReD Associates, were revealed at last week’s Money20/20 in Las Vegas.
Cognizant’s SVP & chief digital officer, global consulting leader, banking & financial services Philippe Dintrans said the authors spent time with families to understand the challenges, behaviours and emotions they experience with everything related to money.
“We are trying to tie together what can be learned from human insights to provide tailored customer experience solutions,” Mr. Dintrans said.
Banks are developing strong artificial intelligence capabilities but would be wise to gain a deeper understanding of true human behaviour, he added.
Consumers experience money in one of two different ways, Mr. Dintrans said. Fast money is engaged with on a regular basis in ways like paying bills, withdrawing funds or paying daily expenses. Fast money transactions are mostly digital ones.
Slow money is more complex. Pensions, insurance and investments have a distant future purpose, with their primary immediate value in peace of mind.
Consumers have eight primary emotions related to fast and slow money, three with fast and five with slow, Mr. Dintrans said.
‘”For example, with borrowed money, the emotion associated is guilt that we need to borrow, even if the borrowing is for a good purpose.”
Purposeful money is devoted to retirement and education funds, or for the trip of a lifetime. People feel distant or have complex emotional experiences with it. Experimental money we use for angel investments or the stock market excites us, emergency funds provide peace of mind and productive stocks and bonds make us feel responsible.
Fast money comes in three forms – tangible, auto-pay and sustenance, Mr. Dintrans said. Tangible items such as art, real estate and collectables provide security while auto-pay expenses are regular deductions generating feelings of ambivalence and hostility.
The final one affects us the most. We need sustenance money to pay everyday expenses, write cheques or pay off credit cards.
“People are on tight budgets and they are not getting the information required to optimize their sustenance money,” Mr. Dintrans said. “There are opportunities for banks to make comparisons of expenses. Banks could do more to provide much better advice to make sure people have the right information to be making decisions.”
Most of the automation has been with fast money, so the bulk of the technological improvement can come with slow, by linking emotion to artificial intelligence, Mr. DIntrans said.
“There is a need for banks to tie in fast money to slow money where the needs are not digitized. Yet there are many synergies if it is done well. It increases loyalty.”
When trying to identify the right investment products, if banks understand the emotions consumers experience they can identify the right types of analytics to assess those needs, Mr. Dintrans said. While old models relied on net worth or socioeconomic data, the next level involves understanding the behavioural and emotional aspects. Models can incorporate different risk factors and perspectives.
“Banks are not reaching out to clients based on their issues, we often reach out to banks,” Mr. Dintrans said.