Latest behavioural insights could help 12.7 million make more of their money

The Financial Capability Lab – a Money Advice Service and Behavioural Insights Team partnership – has developed new ways to tackle challenges faced by financially squeezed households.

  • 1 in 4 people in Britain are ‘financially squeezed’**[1]** meaning they could get into financial difficulty with one unexpected bill
  • The Financial Capability Lab**[2]** tested 17 ideas –informed by behavioural science – to tackle some of the UKs most common money management problems
  • The Lab invites partners to put these ideas into practice, work that could ultimately be scaled up to help more than 12.7m Britons

New research released today showcases innovative ideas aimed at tackling everyday money challenges. This fresh approach from The Financial Capability Lab – a partnership between the Money Advice Service (MAS)[3] and the Behavioural Insights Team (BIT)[4] –was launched to develop new solutions to help people make the most of their money.

Working with more than 90 experts, this new thinking generated over 240 ideas. The 17 strongest were tested in the Lab including: making it easy for people to bank savings on their weekly shop; using current account transaction data to offer timely help and support; and helping people to block unsolicited high-cost credit offers. The tests used a mixture of methods including BIT’s online experimentation platform Predictiv, as well as consumer focus groups and interviews led by Ipsos MORI.

Sarah Porretta, UK Financial Capability Director at the Money Advice Service, said:

“Improving people’s financial capability is a complicated challenge that requires a set of different approaches and collaboration across government, third sector and the financial services industry.

“We all have a complex relationship with money. Behavioural science tries to make sense of how we all make decisions, so that we can predict behaviours and ultimately help people manage their money better.

“The great thing about the Lab ideas is that they can be taken forward with different partners in the context of their own products and services. I am delighted to say that we are already exploring one idea with a major UK bank and are keen to talk to other potential partners to move these ideas forward.”

Elisabeth Costa, Director at the Behavioural Insights Team, said: “Too many households struggle with their finances. The reality of living without a financial safety net means that an unexpected bill or repair could tip people into problem debt. This has broader implications for wellbeing. That’s why it’s so important we bring fresh and evidence-based thinking to the UK’s most pressing money management challenges.

“We set up the Financial Capability Lab with a focus on behavioural science and rapid, robust testing. We’re now thrilled to be bringing partners on board to test our most promising ideas at scale.”

The Lab is part of the ten-year Financial Capability Strategy[5] for the UK devised by MAS to deliver a step-change in how people in the UK manage their money. The Lab has already attracted interest from the financial services industry and seeks further partners – from leading businesses to charities – to conduct a series of field trials over the next two years.

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Spokesperson available for interview: Sarah Porretta, Interim Director of Financial Capability at the Money Advice Service; Elisabeth Costa, Director at the Behavioural Insights Team

For more information please contact:

BIT Press Team: press@bi.team / 0777 139 5371

MAS Press Team: Rosanna.head@moneyadvicesservice.org.uk 07966 964 991

Notes to editors

1. About the Financially Squeezed

Almost one in four adults in the UK (12.7m people) are ‘financially squeezed’. This description was developed by the Money Advice Service to help focus attention on a broad segment of the UK population with significant financial commitments but relatively little provision for coping with sudden changes to their financial circumstances or security. These events can include an unexpected bill, being made redundant or unexpected medical costs. Money Advice Service, The Squeezed Segment, May 2016.

The average savings of financially squeezed households is less than £600. One quarter have no savings at all. They are less likely to seek financial advice or guidance and can be vulnerable to problems with unsecured debt.

• MAS found that one in four adults in the UK are financially squeezed, with significant commitments but relatively little provision for coping with sudden changes to their financial circumstances – whether an unexpected bill, redundancy, or health issue.
• The average savings of financially squeezed households is less than £600. One quarter have no savings at all. They are less likely to seek financial advice or guidance and can be vulnerable to problems with unsecured debt.

2. About the Financial Capability Lab

The Financial Capability Lab is an ongoing partnership between the Money Advice Service and the Behavioural Insights Team. The Lab is designed to generate and rigorously test new ideas for financial products and services with an understanding of behavioural science at their core. In the initial stage of the Lab Ipsos MORI were contracted to undertake qualitative research.

The Financial Capability Lab, and the Financial Capability Strategy of which it is part, provide independent and impartial spaces that actively brings organisations together and invites them to focus their efforts on what truly works. Its new report, ‘A behavioural approach to managing money: ideas and results from the Financial Capability Lab’, is released today: http://www.fincap.org.uk/financial-capability-lab

Organisations interested in partnering with the Lab for further field trials should visit: http://www.fincap.org.uk/financial-capability-lab

3. About the Money Advice Service

The Money Advice Service changes lives by helping people make the most of their money. It is an independent body set up by government to offer free and impartial guidance across a wide range of money matters, and deliver high quality free debt advice through partners. It also leads the Financial Capability Strategy for the UK, coordinating wider efforts to empower people to make the most of their money.

4. About the Behavioural Insights Team

The Behavioural Insights Team (BIT) is a social purpose company. BIT was mutualised in 2014 and is part owned by the Cabinet Office; Nesta (the innovation charity); and its employees. BIT started life inside 10 Downing Street as the world’s first government institution dedicated to the application of behavioural sciences. Since its spin out from Government in 2014, BIT has expanded globally, with offices in New York, Sydney, Singapore and Wellington.

BIT works to:

● Make public services more cost-effective and easier for citizens to use;

● Improve outcomes by introducing a more realistic model of human behaviour to policy; and

● Wherever possible enable people to make better choices for themselves.

www.bi.team

5. About the Financial Capability Strategy

Levels of financial capability in the UK are far too low, with four out of ten of us unable to manage our money, 16 million working age people having less than £300 in savings, and eight million people in serious debt. These are complex problems which impact on individual wellbeing, health and the UK economy and they cannot be solved by any one organisation working alone.

The Financial Capability Strategy for the UK was launched by the Money Advice Service in October 2015 to bring many different people and organisations together to collaborate and take action to address these issues. Employers, charities, government and businesses all want to give people the life-long control and confidence to make the most of their money – from pocket money to pensions.

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