With the cost of everyday goods rising across the world, consumers are increasingly concerned about how they will pay their bills over the next six months.
In light of this, mobile phone carriers and retailers must find smarter ways to encourage payment without holding users to ransom. Nudge theory presents the subtle solution to the problem that they are looking for.
Nudge theory as a science
Introduced by Richard Thaler and Cass Sunstein in their 2008 book: ‘Nudge: Improving Decisions about Health, Wealth, and Happiness’, nudge theory has become a prominent method in behavioural science over the past decade.
In simple terms, nudging is based on the idea that, by shaping the environment – also known as the choice architecture – it is possible to influence the likelihood that one option is chosen over another by individuals.
A key factor of the theory is the ability for the individual in question to maintain their freedom of choice, and to feel in control of the decisions that they make. From reminders of an upcoming doctor appointment, to automated messages providing information on electricity usage, there are many areas of everyday life where nudges has already been implemented and become well established.
For example, if individuals display a particular behavioural or decision-making pattern based on their cognitive boundaries, biases, or habits, it may be possible to ‘nudge’ them towards a preferred option. This is achieved by integrating insights about the very same kind of boundaries, biases, and habits in the choice architecture surrounding the behaviour, in ways that encourage a preferable behaviour rather than obstructing it.
Crucially, Thaler and Sunstein highlight that, through the use of nudge theory, there is the potential to influence people’s everyday choices and behaviours in cheaper, less invasive, and more effective ways. In other words, nudging offers the means to change people’s behaviour without restricting their freedom of choice, or imposing mandatory obligations on them.
How Trustonic uses nudge
In recognition of nudge theory’s subtle power to influence behaviour, we at Trustonic have taken the principals and applied nudge theory to a key part of our platform.
Through notifications and customised messaging via our digital platform, carriers and retailers have the opportunity to remind consumers to pay by sending them messages that strike a more supportive than threatening tone.
By gently ramping up the use of persuasiveness techniques, our customers can gradually increase the persuasiveness of their messaging. In accordance with nudge theory, the idea is that, by doing this, carriers and retailers are more likely to influence customers to pay off their bills in a timely manner.
Not only this, but consumers also get helpful reminders to pay back what they owe without feeling coerced into doing so. This makes them more inclined to pay, and therefore means that our customers are more likely to collect on the payment.
For example, users could receive a notification telling them that their bill is due in seven days’ time. While carriers and retailers retain the right to lock a device the day after non-payment in this scenario, the majority choose not to.
This is because they rely upon the grace period afforded to them by Trustonic’s platform instead.
Carriers and retailers recognise that adopting a nudge approach can evoke a far more positive response from customers, and is more likely to deliver a satisfying solution for all those involved. By increasing communications with the consumer, and the persuasiveness of messaging, carriers and retailers are more likely to avoid needing to lock devices.
However, it is important that they have this deterrent as a last resort. In fact, the threat of device locking alone can influence behaviour. Figures show that 15 per cent of customers who would traditionally have missed a payment are more likely to pay simply because they know their device could be locked if they don’t.
Regional variations in pay, and how this affects nudge theory
Indeed, the results that the platform has garnered to date truly speak for themselves. The solution has delivered around 70% improvements in bill payments to clients. It gives carriers and retailers the flexibility to adapt the way that they communicate with customers depending on their individual needs. This is because we see regional variations in how nudging should be implemented to have the most positive effect possible.
One possible explanation for these variations involves the frequency with which people tend to be paid in certain regions of the world.
For example, in Peru, where the minimum salary is 1,025 PEN – £265 USD – workers are generally paid their wages either weekly, monthly, or once every two weeks. As such, carriers and retailers may decide that they want to send messages to customers on a weekly or even bi-weekly basis to remind and encourage them to pay their bills.
In Uruguay, on the other hand, workers are only able to get their payment monthly, so sending regular messages throughout the month is not as likely to produce a positive result for carriers and retailers. It may be better, therefore, to take a more targeted approach to messaging users, such as sending messages near to payday.
This reduces the likelihood that customers will feel that they are being pestered to pay when they may not be in a position to do so. Furthermore, it encourages them to make the payment shortly after receiving their salary when the bill is still fresh in their mind.
Tailoring the platform
Whichever global markets carriers and retailers are engaged in, and however frequently they wish to message users, the Trustonic smartphone risk management platform can be tailored according to their specific needs. This is thanks to our team of data scientists, who are analyse data on a regional level to provide carriers with the insights needed to make informed decisions about their message targeting.
In this way, patterns and variations in user behaviour can be assessed between the event of a message, the point of the device being locked, and the time taken for it to be unlocked. This enables us to make programmatic changes to the platform on an individual basis.
For example, if a consumer with a specific profile has had their device locked only once before due to late payment, they are more likely to make the next payment on time. As such, the number of nudge messages they receive many not need to be modified, or perhaps can be decreased.
For those who regularly miss payments, however, it may be necessary to increase the number of messages sent to them to improve the likelihood that they will pay on time in future.
In the future, the Trustonic solution will fully automate communications interactions, adjust service and automate payment collection process using Machine Learning. This will enable the system to figure out and implement the right approach for each customer individually, without the need for manual intervention.
Nudge benefits carriers, retailers and users alike
By opening up a dialogue with customers, carriers and retailers can not only increase their base, but also improve loyalty and drive usage. Our services are precisely what enables them to do this and our customers aren’t required to focus on the addressability of their consumer base and whether to give users credit. Trustonic is able to handle this for them, and we are committed to moving to zero-touch within the next 12 months.
If carriers and retailers want to reach the next billion users, they need to look for better ways of managing risk, and nudge theory has already proven to be one of the best ways of achieving this. With the right technology and data, carriers and retailers can have far greater confidence that users will pay on time, potentially removing the need to lock their devices at all.
To find out more about the art of nudging and how Trustonic can help, download our latest whitepaper.
