Summit 2018 - Recap

Financial decision-making: Impact in action
Posted on April 20, 2018

The ability to think forward

The human mind is an enormously powerful force – one that synthesizes information to arrive at decisions at every moment of its existence. Yet, this ability to think forward and assess an appropriate course of action based on factual information falls short of homo economicus – the rational mind that forms the bed rock of our normative assessments of human behaviour. “The human ability to think forward is in beta testing,” remarked Daniel Gilbert at his keynote address in the Think Forward Initiative (TFI) Summit, summarizing succinctly, the core issue that this community of financial technologists, researchers and entrepreneurs are working to find solutions for, specifically in the realm of taking financial decisions.

Daniel Gilbert - Professor of Psychology, Harvard University

The Summit gathered about 200 experts from consumer organizations, NGOs, technologists, financial service providers, and universities to come together and frame the ongoing agenda, think forward and take a step closer to enabling better people’s financial decisions. To begin with, the Summit started off with a call to all participants from Ralph Hamers, CEO of ING, to come together, grow this movement and facilitate the three pillars of TFI’s work: research, innovation and community building to generate insights, frame problems, and design social or entrepreneurial solutions to reach 100 million people around the world. “No one person leads this initiative,” Ralph Hamers reminded the community, and the design of the rest of the summit echoed this philosophy. 

The Marketplace

The marketplace – a place where participants walked around to take a closer look at work done so far by business incubator teams, start-ups in the TFI accelerator’s growth track and research funded by the TFI– was a place of ideas, collaboration and a space that facilitated participants and entrepreneurs to engage with each other and find synergies to move these start-ups forward.

One of the several research projects presented during the marketplace explored the effect of financial warnings on online purchase behavior. Benjamin Timmermans, Monique van Maare and Eva Ziner-Mityokfrom IBM showed that severe warnings that evoke strong negative emotions are the most effective in reducing online expenditure. In a related project, Garrett Meccariello and Tobias Nasgarde from the University of Pennsylvania demonstrated with an experiment that it is possible to make people aware of unnecessary online purchases by using simple messaging techniques during browsing. Olga Goldfayn and Nathanael Vellekoop from Goethe University explored how personality traits are related to the borrowing behaviour of Dutch households, finding that more extrovert and “agreeable” people with a considerable degree of self-awareness have better prospects of being approved for a loan from a financial institution. Sudheer Chava and Nikhil Paradkar from the Georgia Institute of Technology showed how marketplace lending platforms are used by individuals to pay-down expensive credit card debt; however, these borrowers run the risk of reverting to using their credit cards and be more indebted after one year. Several more such projects were on display at the marketplace, in the hope that entrepreneurs and technologists can take these research insights forward into actual business or social solutions to be deployed in the real world.

From TFI’s accelerator track,  two sorts of projects were presented: incubator projects and growth track projects. One of TFI’s incubator projects is Jarvis, which is an idea for a digital financial assistant that aims to give the right ‘nudge’ at the right time, to help users regularly save money. Next to that, four growth track projects were presented. Limitless is a white-labeled mobile app for automated micro-investments particularly aimed at helping young people to reach their financial goals faster. MoneyCoach, a personal finance app that helps customers keep track of income, expenses and debt was uniquely designed to help individuals achieve their goals and take stock of how they may be able to optimize their financial lives. To target younger individuals in their growth into leading financially responsible lives, Otly! Is a new app targeted at parents to manage, track and control the allowance of their children, thereby making them learn to be more financially responsible. Quotanda, a lending service platform provides a distinct, low-cost two-sided platform for student loan providers and student loan seekers to reduce market frictions that deter millions of capable individuals from accessing finance to fund higher education. Such start-ups financed by TFI’s accelerator track are directed at every stage of an individual’s life, thereby using important lessons from behavioral finance to improve the financial lives of its customers.

The breakout sessions

In the second half of the summit, participants were grouped into different breakout sessions to focus on what the various challenges confronting this community are and to define research and innovation questions that require more attention from the community going forward. Breakout sessions were focused on specific areas such as the flexible labor market and the “gig” economy and on retirement savings. Broadly, all participants were divided into different stakeholders in the area, and then participants discussed threats and opportunities to arrive at the biggest challenge confronting the community going forward within each of the areas. For instance, with the effect of longevity on retirement savings, this breakout session came up with suggestions to use nudges to improve retirement savings by showing a graph of where in the distribution of pension savings a household currently was – in the hope that households learn about how much more or less they save for retirement and act to alter their behaviour. Similarly, the breakout session on flexible labor market identified the opportunity for financial institutions to internalize and develop new financial products for individuals who are a part of the “gig” economy, defined by irregular income flows, such as insurance against risk of job availability and also rethink contracts such as mortgages to take this new development in the labor market into account.  

This network of technologists, entrepreneurs, academics and NGOs has counterparts around the world. Sarah Gordon, the Chief Strategy Officer of the Center for Financial Services Innovation in the United States, reminded the TFI community of the long and arduous road to improve the financial lives of households, and the need to commit and invest in projects that will bear fruit over time. Although this seems difficult and hard to commit to, the community also heard from Mick Ebeling the CEO of Not Impossible, an organization that develops creative solutions to address real world problems, who urged the community to think forward by remembering to base it on a simple narrative of what each of us are committing towards. “Start with one person, one story and take the solution to this one person’s constraint far and wide,” he urged, recognizing the importance of personalizing TFI’s goals and objectives to each individual in the community. The open structure of TFI, Ralph Hamers emphasized in his concluding remarks, was to facilitate a market place of ideas, making seemingly impossible collaborations possible, and to allow every effort to enable all three steps to achieve TFI’s objective: innovate, test, and then scale.