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Nobel prize: nine nudges you need to know

Nine 'nudges' that follow the theory of Nobel Prize winning economist Richard Thaler.

You would need to have been overwhelmed by inertia last week to have missed news that US economist Richard Thaler (pictured), whose work inspired workplace pension auto-enrolment in the UK, has won the Nobel Prize in Economic Sciences.

Thaler’s nudge theory suggests positive reinforcements and indirect instructions can help motivate decision-making. Or ‘make it easy,’ as Thaler said in an interview in 2011.

Here are four examples of nudge theory in financial services, and a couple from outside the profession…

You would need to have been overwhelmed by inertia last week to have missed news that US economist Richard Thaler (pictured), whose work inspired workplace pension auto-enrolment in the UK, has won the Nobel Prize in Economic Sciences.

Thaler’s nudge theory suggests positive reinforcements and indirect instructions can help motivate decision-making. Or ‘make it easy,’ as Thaler said in an interview in 2011.

Here are four examples of nudge theory in financial services, and a couple from outside the profession…

Pension Passport

The Behavioural Insights Team, otherwise known as the Nudge Unit, this week published the results of three randomised control tests encouraging UK consumers to access pension guidance.

The team designed a Pension Passport in collaboration with Liverpool Victoria that consolidated the usual 50-100 pages of pensions info onto one side of A4 paper. The results showed those with the Pension Passport were more likely to seek out Pension Wise guidance.

Tax

Simplifying financial info for customers to nudge them into action has also been used by the Nudge Unit when it comes to tax. The unit saw the results of sending tax letters in plainer English, and in some cases, including photos. In 2012 it used messages such as ‘nine out of 10 people in your X pay their tax on time’ to encourage tax compliance. The difference between the control group and the most compliant group was 15 percentage points.

Auto-enrolment

Heralded as the big win for nudge theory, auto-enrolment into workplace pensions taps into people’s tendencies towards inaction over action. Since its introduction in 2012, auto-enrolment appears a success has encouraged more than 7.5 million people to save.

Increasing contributions

Minimum contributions into workplace pensions are set to increase to 8% in 2019. The Pensions Regulator has outlined the action needed to be taken by employers to make this happen, but again, as savers, the default position is to do nothing. Another excellent nudge it seems.

Eat your greens

Across the pond in a supermarket in El Paso, researched placed green arrows on the floor directing shoppers to the fruit and veg aisle. The produce director noticed in nine times out of 10, customers followed the areas.

Thoughtful commutes

In 2014 the Singapore Land Transport Authority launched a campaign to bring happiness to the daily commute. A combination of cute cartoon characters, hashtags and rhyming slogans aim to bring thoughtfulness to train journeys. The bespectacled #StandUpStacey can be found stuck on tube windows saying ‘On your feet, offer your seats’. Football lad #BagDownBenny proclaims ‘Bags down for less frowns’. It may not translate to the Central Line.

Sing for smokes

In 2014, Dutch/Turkish design agency ioglo created a cigarette dispenser that lights up and sings when cigarette butts are binned in it. The ‘smoke pole’ aimed to encourage smokers not to litter, ‘rewarding’ them for disposing of their fags. Can 56 LED lights and 50 audio clips ranging from gospel to dance tracks to Homer Simpson’s ‘D’oh!’ a reward?

Signs for speeders

When speed bumps and stop signs haven’t worked, some nudgers have come up with creative ways to slow traffic. In Vancouver, oil paintings of children playing were painted on busy intersections (pictured). And in the UK, smiley faces were trialled under speed boards, triggered by driving under the speed limit.

Urinal flies

We couldn’t build a gallery without including the classic nudge: the urinal fly. Originating at Amsterdam airport, images of flies near urinal drains can now be found across the globe. Spillage on bathroom floors has supposedly been reduced by 80% as a result. This says much for nudge theory, but perhaps even more about the average male urinal user.

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