Give ‘Em The Slip: Using Friction for Savings

By: Maura Farver, Stephanie Tepper, and Matt Trower

Millions of Americans operate primarily in a cash economy. These individuals not only carry greater risk in storing their money, but also miss out on the potential benefits of savings products. This is true of a high percentage of members at the Latino Community Credit Union (LCCU), established in 2007 to serve Latino communities of North Carolina. Approximately 18% of all LCCU members walk into credit union branches with the purpose of cashing a check. The credit union targeted this problem to increase their members’ security and engagement with the credit union.

 To encourage more people to deposit part of their checks into an account, the Common Cents Lab partnered with LCCU to create check-cashing slips. Originally, LCCU’s process to cash a check was simpler than the process to make a deposit; deposits required members to fill out a slip, while cashing did not. Even a seemingly small hurdle can influence people’s decisions, so the greater convenience of cashing checks works against encouraging members to deposit some of their funds. Our suggestion to add a slip was not exactly exciting to LCCU – no one says “I know what customers want – more forms!” – but we emphasized that the existing process was encouraging the wrong behavior and pressed them to test this idea.

Tellers at LCCU were given randomized stacks of check-cashing slips to test different behavioral concepts. In addition to the “control” (a sheet of paper that indicated the member should not get a slip), there were three treatment slips:

• A “default” slip with the option to deposit 50% of the check selected
• The same “default” slip with a “risk waiver” on the back to highlight the potential loss of funds if the check is cashed
• An “easy check cashing” slip encouraging members to deposit a multiple of $10

Tellers provided the slips to members when they asked to have their checks cashed. Members were instructed to fill out the slip, and tellers provided help when necessary. Slips were provided in both Spanish and English depending on members’ native language.

While we only observed nominal differences among the three different types of slips, we did see a significant difference in deposit rates between having a slip and having no slip (the control). Almost 10% of customers who were given any kind of check-cashing slip made a deposit into savings – and on average, those deposits were $169! If LCCU rolled this out at all of their branches, we estimate they could help their members save $2.1 million per year and ultimately ensure greater financial security. This increase in deposits could ideally also lead to greater engagement with other credit union products, like long-term savings accounts or loans.

Almost 10% of customers who were given any kind of check-cashing slip made a deposit into savings – and on average, those deposits were $169!

While we often urge organizations to remove friction that impedes positive action, in this instance we added friction to prevent people from taking the wrong action. Sometimes people are seeking big, revolutionary changes to help address their problems, but this test proves that small tweaks can have powerful impact – and low costs to implement, too.

Maura Farver is a Senior Behavioral Researcher at the Center for Advanced Hindsight. She holds a Master of Environmental Management degree from Duke’s Nicholas School of the Environment and an MBA from UNC’s Kenan-Flagler Business School. Her research focuses on behavior to increase financial well-being and she is also interested in environmental health behavior.  Maura can be reached at maura.farver@duke.edu.