Behavioral Analytics: The New Frontier?

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Over the years, banks’ analytic capabilities have dramatically evolved. At first, analytics were descriptive, focused on answering the question “What happened?” Eventually, banks began to leverage predictive analytics to answer “What will happen?” Most recently, analytics have moved from predictive to prescriptive to answer the question “What should we do?” So, what lies ahead for financial institutions?

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In a podcast interview with Worthix, former FICO CEO and Research Fellow Larry Rosenberger asserts that Behavioral Analytics are the new analytics frontier. He outlines four key pillars that make up Behavioral Analytics:

  • Behavioral Economics – Understanding cognitive biases inherent in how people make decisions, and designing incentives accordingly
  • Behavioral Psychology – Learning how people motivate themselves to create long-term, sustained habits
  • Advanced Gamification – Leveraging human-centered design principles to build systems that reward sustained engagement
  • Bilateral 1:1 Dialogue – Delivering customized, personal conversations to customers with minimal friction

Juntos, which was born from a project at the Stanford d.school, relies on many of the principles embedded in the first three pillars to deliver the fourth pillar. Extensive user research at the beginning of each project feeds into a human-centered design process to create conversation sequences that encourage behavior change.

For example, Juntos may design dialogue to learn why a customer is motivated to save, and then share savings reminders and tips related to that motivation. Or it may employ a strategy that identifies existing customer habits, and then builds on them to form the basis of new behavior (e.g., encouraging customers to make a deposit on their way to the grocery). According to Rosenberger, banks that can use new technology like Juntos to deliver frictionless experiences stand to win and retain relationships: 

Focus groups, to this day, are expensive. If you can have a conversation using technology and ask questions to make better, appropriate offers… you can understand more about [your customers] so you can tune your communications, offers, and experiences to be more effective.

One big bank I spoke to couldn’t imagine how to manage these millions of bilateral conversations because their mindset was back in old technology. They didn’t understand what can be done today with smartphones and SMS’s... You can take advantage of fast, cheap and comfortable conversation vehicles to make this happen, and figure out what’s the next question to ask based on where the conversation has gone.

You can find the full podcast episode here!