“What [the UK tax service] did was leverage what we call ‘social norms’,” she said. “The idea is we are influenced by how others behave.”
It took just one sentence in a form letter from Her Majesty's Revenue and Customs service to increase positive responses from delinquents by 1.5 per cent. The line was simple: "Nine out of 10 people in the UK pay their tax on time"
Another sentence - "You are one of the few who have not paid us yet" lifted success by 3.9 per cent, while making reference to the hometown of the lax payer saw a 6.8 per cent rise.
“I think this is why behavioural economics is really enticing to regulators and government because it really feeds into that deregulation context,” McGrath said. “You can make a small change and have a huge impact without using prescriptive laws or regulation.”
Dr Joy said banks like ANZ needed to be responsive to what regulators were saying about the use of behavioural economics - as well as what competitors were doing.
“Regulators overseas, like the Financial Conduct Authorityin the UK and ASIC in Australia use behavioural economics to inform both their regulatory policy … [and] how they approach their supervision,” he said.
“It’s becoming a really interesting and powerful way for them to look at financial services regulatory problems. “
They also touched on how competitor banks are using behavioural economics and effective techniques for getting the right outcomes for customers. Watch the video above to find out more.
Andrew Cornell is managing editor at BlueNotes