A great session around the use of behavioural science and how this can be leveraging to engage customers and help provide support in the collections process.
An in-depth exploration of how behavioural science can be applied to improve outcomes within debt collections. Led by Alison Doyle from Symend, the discussion covered psychological theories underpinning human decision-making, such as heuristics and biases, and explained how these create obstacles for consumers in financial distress.
Real-world examples—ranging from prospect theory to weak deterrents—highlight the relevance of behavioural insights in collections strategy. The session further introduced tactical applications like choice architecture, social proof, and financial education. Emphasis is placed on testing, ethical use, and scalability to ensure effective integration into operations.
Key Take Aways
- Behavioural science addresses the intention-action gap, helping individuals bridge the disconnect between what they intend to do and what they actually do.
- Consumer decision-making is influenced by cognitive biases and heuristics, such as optimism bias, the ostrich effect, and weak deterrents.
- Context significantly affects behaviour—people respond differently to the same scenario depending on whether it is framed as a gain or a loss.
- Stress and shame reduce cognitive capacity, further complicating debt resolution efforts for consumers.
- Simple changes to messaging—such as educational nudges or promoting self-agency—can materially affect outcomes.
- Many consumers engage in mental accounting, treating money in different ‘pots’, which can prevent optimal use of funds.
- Choice architecture is a powerful tool, used in both marketing and collections, to influence decision-making through structuring of choices.
- Behavioural interventions must be designed ethically, avoiding manipulation or “weaponised” choice architecture that leads to perverse incentives.
- One-size-fits-all approaches are ineffective; successful strategies rely on segmentation based on behaviour, not demographics.
- Testing and iteration are essential, with A/B testing recommended to measure the impact of specific behavioural nudges.
- Behavioural science should be embedded at scale, not just championed by a single expert or team.
- Behavioural science is increasingly used by regulators and public bodies, lending legitimacy to its application in financial services.
Innovation
- Use of personalised behavioural interventions at scale, supported by segmentation based on consumer behaviour patterns (e.g., frequent delinquents vs first-time delinquents).
- Integration of psychological models into collections strategies, such as prospect theory and optimism bias, to explain customer behaviour.
- Behaviourally informed digital tools, like a “Learn More” button linking to interest calculators and educational content to support customer understanding.
- Leveraging loss aversion and social proof in communications to increase engagement (e.g., “98% of our customers pay within 72 hours”).
- Proactive environmental structuring (choice architecture) in digital and written communication to guide consumers toward optimal decisions.
Key Statistics
- 35,000: Estimated number of decisions the average person makes per day.
- 1 in 3: Consumers have paid only a little in the last six months.
- 2 in 5: Consumers are living paycheque to paycheque, a figure that is rising.
- 46%: Consumers carrying debt due to an emergency expense.
- 60%: Interest and charges could be avoided with minor behavioural changes.
- 3 in 4: Fall below the UK benchmark for financial literacy.
- 3 in 4: Consumers admit they do not fully understand their energy bills.
- 2 in 5: Don’t know their credit card interest rate.
- 1 in 2: Consumers don’t feel confident managing their finances.
- 1 in 8: Admit to not opening letters or emails from service providers.
Key Discussion Points
- Behavioural science is not new but integrates established disciplines (e.g., psychology, sociology, anthropology).
- Prospect theory illustrates risk-seeking vs risk-averse behaviour, depending on whether the scenario is perceived as a loss or gain.
- Consumers often delay action due to optimism bias or the ostrich effect, assuming their situation will improve soon.
- Mental accounting can prevent rational financial decisions, such as refusing to use savings to cover bills.
- Low financial literacy impedes consumer decision-making, making education a critical component.
- Self-agency messaging can improve consumer engagement, giving a sense of control and empowerment.
- Too many choices lead to decision fatigue, reducing consumer engagement with communication.
- Perverse incentives are a risk, as demonstrated by Uber’s driver incentive scheme leading to poor passenger experiences.
- Behavioural science must be used ethically, particularly in regulated industries like debt collections.
- Social norms can drive either responsible or irresponsible financial behaviour, depending on how they are framed.
- Public policy applications offer evidence of efficacy, such as improvements in tax compliance and organ donation rates.
- Embedding behavioural science requires robust infrastructure, including data systems to track and measure consumer behaviour dynamically.
See also Implementing Behavioural Science in Collections
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