Product Management

Turbocharging FinTech with Behavioral Science

Behavior Science for FinTech

Several years back, during a class presentation, my classmate challenged our team about changing one’s behavior. We were recommending a few minor changes in our daily routine that would help in the longer term. “Now, how will you make me do that ?,” he asked. I confidently replied, “People do not do the right thing because they do not the knowledge/ information. Now that you have the info, I’m sure you’ll do what’s right.”

But I was wrong. Information or education does very little to influence behavior change. If that worked, no one would be texting while driving on our roads today.

Financial decisions, much like other decisions, are a function of an individual’s personality and decision making process. It’s a function of that individual’s behavior.

While FinTech can help increase access to efficient financial services, FinTech’s impact can be turbocharged by applying Behavior Science principles to influence positive behavior change in the user.

FinTech products or services that aim for Financial Inclusion will benefit more from application of Behavioral Science principles since the hurdles to behavior change for this audience can be higher.

These thoughts were reinforced when I took Acumen’s course on Udemy titled: Dan Ariely on Changing Customer Behavior.  Dan Ariely, of course, is the Psychology and Behavioral Economics professor at Duke University, who is a bestselling author and a well-known TED speaker.  The course was not specific to Financial Services.

To get specific insights about applying Behavioral Science in Financial Services and FinTech, I spoke to someone who has firsthand knowledge on this subject: Dr. Thomas Oberlechner.

Thomas Oberlechner has a PhD in Psychology, has been the Head of Psychology at Webster University (Vienna), Visiting Scholar at Harvard and Visiting Fulbright Professor at MIT. At FinPsy, LLC, a Financial Psychology consulting firm which he co-founded, his team translates Behavioral Science knowhow into hands-on decision making support for Financial Practitioners. In this video, he shares more about his background.

“Psychology is at the heart of financial decision making”

Every person’s decision making process encompasses an element of their behavioral personality. Financial decisions are no different in this regard; they are dependent on the personality/ psychology of the individual. Talking about this subject, Dr. Oberlechner shared how behavioral dispositions can lead to sub-optimal financial decisions in consumers as well as financial professionals.


In fact,  Mark Suster, a VC General Partner, called out the influence of behavioral dispositions in his recent Medium blog post.


Behavioral Science can personalize FinTech offerings to an ‘individual’ level

Dr.Oberlechner used the example of ‘risk tolerance’ to explain that FinTech that incorporates Behavioral Science  can grasp this complex concept much better than current practices of questionnaires or intuition.

“Risk is about your conscious preferences – things that you want and seek, but is also about motivation – things that drive you without your knowledge of them, about your personality traits and about your perceptions – what you perceive and your reaction to the situations. Risk is also determined by and can be changed by your values and your goals. So current methods like simplistic questionnaires or mere advisor  intuition cannot capture the essence of a person’s risk tolerance well. So, we (FinPsy) systematically apply Behavioral Science using technology to create interactive and comprehensive risk assessments to understand individual risk tendencies.”

In the segment below, Dr. Oberlechner provided two concrete examples of Behavioral Science application in a (D2C) FinTech app and (B2B) Financial Services tech offering respectively.


Behavior Science based product design can influence user behavior

While you may know that you need regular exercise, you’ll be less motivated to exercise if you need to travel to a gym 15 miles away everyday for your workout. So, knowledge is not enough to influence behavior change. If people have to cross hurdles, even minor, to change behavior, it negatively affects motivation. And people who can benefit most from financial inclusion initiatives face more such hurdles.

So, product designers need to apply design thinking methodology – pay close attention to the customer journey, remove even minor hurdles and create a path of least resistance towards the desired behavior.

Dr. Oberlechner shared some very practical (Behavioral Science based) tips for FinTech product designers to nudge users in the right direction below.

“Digital ubiquity does not change basic human tendencies, but can reinforce some”

Per Dr.Oberlechner while basic human tendencies remain the same in a digital world, some of them get reinforced and others manifest in a different form. So, how do FinTech products need do adapt? Find out in this segment:


(FinTech) ‘Experience’ is not just about Tech or Finance, it’s also about Psychology

Dr Oberlechner shared that it’s time FinTech practitioners looked to Behavioral Science to make their offerings more effective. He said, “FinTech provides us with a unique chance to combine human intuition with a systematic, science based approach to make products more interesting and meaningful to users.”

He shared some of those Behavioral Science principles in this segment below:


Dan Ariely joined Lemonade, a FinTech/InsurTech start-up as its Chief Behavioral Officer in 2016. I would not be surprised if more and more FinTech practitioners consulted Behavioral Science experts to turbo-charge their FinTech offerings.