Banking on Biases

Why data and behavioural science are a natural fit
Banking with Biases

The essentials

Melaina Vinski PhD, the behavioural economics lead at PwC Canada, has an MSc and PhD in cognitive neuropsychology. She also has a love for applying what she knows about human behaviour to help her clients adapt to and be resilient within a quickly evolving and complex world. In a recent presentation to a culture of analytics conference organized by the Scotiabank Centre for Customer Analytics of Smith School of Business, Melaina discussed the value of marrying behavioural science with the elegance of advanced data analytics. The following is an adaptation of her remarks.

By Melaina Vinski

It all begins with the brain. It is the epicentre of what we value, why we behave the way we do, and how we make decisions. Inundated by an overwhelming amount of information across the five senses during every moment of our waking lives, the brain tends to rely on mental shortcuts that have evolved to help us learn from the past, understand the present, and navigate the complexity of our everyday lives. Behavioural economics is the study of how these mental shortcuts lead to biased and, more importantly, predictable patterns in decision making and behaviour.

At PwC, we leverage the behavioural economics toolkit to understand the behaviour of individuals, groups, and organizations, and, in turn, develop solutions that help organizations better serve the needs of their customers. Taken as an individual tool, however, applied behavioural science provides only half of the picture and half of the solution. This is where customer analytics plays a critical role in improving business outcomes. The customer analytics toolkit is all about using millions of data points — essentially, a reference for the decisions people make and the way they behave — to understand the associations between a variety of variables and how those associations determine important outcomes, from trust to loyalty, from sales to the value of sustainability. Using this foundational knowledge, we have a better idea what set of levers should be pulled with behavioural economics to generate change within an organization. The resulting solutions are more tailored, targeted, and effective than either tool on its own.

Companies that have applied the principles of behavioural economics outperform their peers by 85 percent in sales growth and 25 percent in gross margin

But does applied behavioural science actually work? The evidence suggests that it does. Previous research by Gallup has shown that companies that have applied the principles of behavioural economics outperform their peers by 85 percent in sales growth and 25 percent in gross margin — a testament to the tactical nature of behavioural science applied in an effective way.

At PwC, we have seen the results. When a client was experiencing abnormal customer churn relative to the market, we leveraged attrition analytics to build a proactive engagement strategy that saved the company millions in revenue. When claimants of a worker’s compensation program struggled to return to the workforce, we identified barriers to recovery and, with positive engagement and framing, were able to get claimants back to work more than 20 percent faster. Aware of points that generate stress and anxiety for customers managing the complexities of a car accident, we altered critical interactions (and behaviour) of both adjusters and customers to make the process smoother. As a result, we saved the insurer an estimated millions.

In a world of shifting customer expectations, swells of data, and an increasingly concrete bridge between the ivory tower and industry, the marriage between data and behavioural science has never been so impactful or relevant.

> Test your cognitive biases

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