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2017 ANNUAL REPORT

Common Cents Lab

About

Common Cents Lab

Common Cents, supported by funds from MetLife Foundation, is a financial research lab at Duke University that creates and tests interventions to help low- to moderate-income households increase their financial well-being. Common Cents leverages research gleaned from behavioral science that lead to positive financial behaviors.

The Common Cents Lab is part of the Center for Advanced Hindsight at Duke University. Common Cents is comprised of researchers and experts in product design, economics, psychology, public policy, advertising, business administration, and more. The lab is led by Behavioral Economics Professor Dan Ariely. Ariely has written three New York Times bestsellers, including Predictably Irrational. To fulfill its mission, Common Cents partners with organizations, including fin-tech companies, credit unions, banks and nonprofits, that believe their work could be improved through insights gained from behavioral economics.

To learn more about Common Cents Lab visit www.commoncentslab.org.

MetLife Foundation

MetLife Foundation was created in 1976 to continue MetLife’s long tradition of corporate contributions and community involvement. Since its founding through the end of 2017, MetLife Foundation has provided more than $783 million in grants and $70 million in program-related investments to organizations addressing issues that have a positive impact in their communities.

In 2013, the Foundation committed $200 million to financial inclusion, and our work to date has reached more than 3.5 million low-income individuals in 42 countries. To learn more about MetLife Foundation, visit www.metlife.org

Dear Reader,

With the second full year of Common Cents Lab in the books (in this book, to be more precise), there is much progress to acknowledge. While Common Cents Lab is a research entity, its work does so much more than create interesting research. It creates easier, more intuitive ways for people to save – which is something that most people say they want to do, but find difficult.

In 2017, twenty-seven organizations worked with Common Cents Lab to design products or outreach strategies that have helped nearly 500,000 low- and moderate-income Americans thus far. The organizations’ projects are varied. Some helped people save in the most traditional sense; others surfaced ways for individuals to decrease their debt and expenses. In the experiments conducted thus far, more than $10.5 million went into the pockets of real people. While often in increments of $20 at a time, this savings total is a starting point to financial security for more people.

At MetLife Foundation, we believe in the power of understanding human behavior and designing products, services and interventions that help people spend less and save more – in a way that’s profitable for providers at the same time. That’s why we support Common Cents Lab. We think these experiments are just the beginning – as each partner organization continues to apply what it’s learned about human behavior, there will be more ways for low-income people to continually improve their financial health.

Talking to one of the Common Cents cohort members recently, I was told, “I got funding and great fintech knowledge from an accelerator program; but I got growth and scale by understanding customers – and that was from working with Common Cents.” It was such a great reminder that all of us working in the financial health space (whether you call it financial inclusion, asset building or something else) are dependent on each other to succeed in our shared goal: helping real people achieve their aspirations by creating and delivering financial services and tools that make “managing your money” less time consuming and easier.

MetLife Foundation supports financial inclusion and financial health in more than 40 countries, working with more than 150 partners. In addition to our grantee partners, we’ve also heard from many not-for-profits, credit unions, regional banks, tech entrepreneurs, academics, students and others that they have found this annual report to be a useful tool. We encourage you to read the report, share it, and do something to make good financial decisions feel like common sense for more people in the U.S. and abroad.

Evelyn Stark
MetLife Foundation


Executive Summary

In 2017, the S&P 500 reached historic peaks, the unemployment rate hit a low of just 4.1%, the poverty rate decreased to 12.7%, and median household income has risen by 3.2%. Yet, these positive macroeconomic trends accompany widening income and wealth inequality, where large swaths of the population are being left behind.

The personal savings rate for the bottom 90% of households in the United States is 0%, credit card debt has reached more than $1 trillion for the first time since the Great Recession, an estimated 40% of people 5-10 years from retirement have no money saved, and 1 in 3 Americans have debt that is currently in collection.

To quote Charles Dickens, “It was the best of times, it was the worst of times.”

90% of households in the U.S. have a 0% personal savings rate

$1,000,000,000,000

Credit Card Debt

40% of people 5-10 years from retirement have no money saved

1 in 3have debt in collection

Furthermore, more and more Americans are moving out of traditional employment and into the gig economy. This means that they have less access to insurance, benefits, and the financial security often provided by employers. This complex financial environment sheds light as to why Common Cents Lab is needed. Everyone aims to be financially stable, but not everyone has the right decision-making environment to accomplish this goal.

Our Focus

Common Cents Lab is a financial-decision research lab at Duke University that creates and tests behavioral science interventions, with the mission of improving the financial well-being of millions of low- to moderate-income (LMI) individuals. Common Cents is generously supported by MetLife Foundation.

Now in our second year, we continued to use social science and behavioral economics to tackle the most challenging financial issues for the most vulnerable households in the United States. Our talented team of researchers, data scientists, designers, and product managers, work across five core areas:

  • Increasing Earnings
  • Managing Cash Flow
  • Decreasing Expenses
  • Managing Debt
  • Increasing Long- and Short-Term Savings
  • Increasing Earnings
  • Managing Cash Flow
  • Decreasing Expenses
  • Managing Debt
  • We achieve our mission by partnering with mission-focused organizations, creating financial prototypes, and sharing our insights with the world.
  • Increasing Long- and Short-Term Savings

Our Impact

In 2017, we partnered with 27 organizations, including startups, credit unions, nonprofit organizations, and local governments. This number is up from 2016, when we partnered with 17 organizations.

Our work typically falls under two types of projects – prototypes and optimization. Prototypes are projects that result in building a product or service that did not exist before. Optimization projects are those that help partners improve an existing product or service. For both types of projects, we run randomized controlled trials in order to fully understand the true impact of our work.

27 Organizations

In 2017, we worked on 38 prototypes and optimizations, up from 19 in 2016. We launched five pilot prototypes, and ended the year with seven additional projects in development. In addition, we finished and tested 18 pilot optimizations, with eight more either in the field or in development. In addition to the projects that we started in 2017 projects, we continued to push our 2016 initiatives from pilots to full rollouts.

Since our launch in 2016, our 57 pilot optimizations and prototypes have reached over 1.7 million individuals and positively impacted the financial behaviors of 498,000 low- to moderate-income individuals. At full rollout, we estimate that these projects will reach 4.4 million people, and positively impact the financial behaviors of 1.4 million individuals.

It is important to note that this estimation of our impact does not include any possible expansion of our pilot prototypes or optimizations to additional partners, or any indirect impact we may have obtained from the practitioners who attended our conferences, office hours, or webinars.

At full rollout, we estimate:

  • Reach of 4.4 million people

  • Positively impact financial behaviors of 1.4 million individuals

It is important to note that this estimation of our impact does not include any possible expansion of our pilot prototypes or optimizations to additional partners, or any indirect impact we may have obtained from the practitioners who attended our conferences, office hours, or webinars.

Our 8 Key Highlights

Since launching Common Cents Lab in 2016, our work on over 50 pilot experiments and prototypes has led us to develop eight key insights that can help practitioners improve the efficacy of their products.

Just Ask!: “If you don’t ask, the answer is always no.”

– Nora Roberts

We have a limited amount of attention. Interventions that manipulate the salience of a specific opportunity help to break through the cognitive load of daily life. We found that just asking clients to do something is a way to increase an opportunity’s salience and can lead to some baseline level of behavior change.

Simply asking users to start saving for an upcoming tax bill led to a 13% sign-up rate





For example, we utilized this learning with our first engagement with EarnUp, an automatic payments company. In this experiment, we sent out two versions of the same email with the goal of getting homeowners to increase their mortgage payments. Even our control email (which contained no incentives, and yielded the lowest conversion), resulted in 11% of users who opened the email signing up to increase their payments. During a separate email experiment with Payable, an invoicing service to pay contractors, we found that simply asking users to start saving for an upcoming tax bill led to a 13% sign-up rate.

Our “just ask” finding seems to impact behavior in the physical space as well. During the tax season, we asked about 2,590 filers to submit a referral to encourage their friends or family to use the free tax site. Even in our control condition, where there were no additional incentives, 13% of tax filers texted one person a photo of their referral card.

9% of members deposited ~22% of their paycheck

In an experiment with Latino Community Credit Union, we focused on increasing short-term deposits at the point when members cashed their check. Traditionally, when members cash their full check they are never asked how much of it they want to deposit. We decided to start asking. In our experimental condition, we had members fill out check cashing slips that required them to note how much they wanted to put into their account. This intervention led to roughly 9% of members depositing roughly 22% of their paycheck, instead of cashing the entire check.

Time the Ask Well!:

“Timing is everything”

– American Proverb

The next step is to time the ask well by thinking through a user’s frame of mind. Elaborate effort is often put into designing product features or crafting marketing materials, but behavioral research suggests that we may be missing a key piece of the puzzle – timing. When we ask people to make a decision can influence the outcomes and should be considered in early design phases.

For example, in partnership with Digit, a savings app, we focused on increasing savings at tax time. In one condition we asked users to save at the moment that they received their tax refund. In a second condition we asked users to save before they’ve even filed their taxes. The latter condition was most effective, increasing tax time savings from 17% to 27%, resulting in a 58% increase. Why? Because in the future we are our perfect selves; today, we are full of temptations.

This simple tax time savings intervention led to $1M in savings

In the future we are our perfect selves; today, we are full of temptations

In another experiment with St. Louis Office for Financial Empowerment, we focused on increasing parents’ participation in the city’s universal college savings accounts. In one condition, we sent parents a letter via mail and in the other condition we sent parents the same letter in their children’s backpacks. In the letter, we specified their next step, either returning an attendance consent form or making a deposit. Sending the letter via the child’s backpack was slightly more effective, increasing parental action by 53%, from 3.19% to 4.88%. Notably, the low parental response rate across the board suggests that the positive impact we saw is only just starting to chip away at the multitude of barriers that parents face. We do believe one of the reasons for this small increase in parental engagement is that we changed the timing of when the parents would read the letter. In one condition, parents read the letter when they were sorting through bills or junk mail and in another condition, they read the letter when they were engaged with their child.

Remind Them!: “Men more frequently
require to be reminded than informed.”

—Samuel Johnson

Now that you’ve asked your members, clients or users to do something, remember that they are living full lives! We can all benefit from a reminder, especially if it’s a reminder about something we want to do but isn’t easy, fun, or pressing. For example, through our partnership with Robin Hood Foundation, we partnered with Ariva, a free tax preparation site in the Bronx. We created a simple text message reminder, and sent it to their existing client base, reminding them to come back to Ariva to get their taxes done for free. This simple intervention increased attendance by 12%, from 33% to 37%.

This simple intervention increased attendance by 12%, from 33% to 37%

Make it Easy to say Yes and Hard to Say No!:
“The sweetness of doing nothing.”

– Italian Proverb

We want to make it as easy as possible for people to say “yes” to the ask: so easy that it approximates doing nothing. For example, we partnered with Self-Help Credit Union to help increase retirement savings.

For new checking account holders who weren’t already saving for retirement, we bundled their checking account with a retirement savings account that automatically received a percent of every checking account deposit.

Account holders could always opt-out and close the retirement savings account. In our early pilots, we’ve found that 37% of eligible members decided to enroll and almost 80% of enrolled members have kept their account active.

Expected retirement savings of over $750K per year

In another example, we worked with Latino Community Credit Union to help borrowers round up their loan payments to the nearest $25 or $50. The extra payment is then transferred to a savings account that the borrower can access at any time. We gave everyone this option and then allowed them to opt-out of the program. We saw a 26% enrollment rate.

This is astonishing as we were asking members to pay extra every month. We also had another condition in this experiment: we made it harder for borrowers to say “no” to enrolling in the loan program. In our experimental condition, if people wanted to opt-out of the round up program they had to check a box that read “I don’t want to have $[1000] in savings by the end of my loan payment period.” This loss aversion framing highlighted what borrowers would be losing by opting-out, and increased enrollment rates by 46%, from 26% to 38%.

Now, one third LCCU’s borrowers are also savers

Give People a Reason to Act Today!:
“Vagueness and procrastination are ever a comfort....”

- John Updike

Now let’s focus on making the ask tangible and real. Ambiguity is your enemy. Many times we aren’t motivated to act for the ‘right’ reasons. We are instead motivated by immediate rewards. Getting people to improve their finances because of the long-term virtues of financial health is a difficult challenge, providing a more immediate reason to make a change today could make that easier.

Deadlines are a quick and easy way to incentivize behavior today (not tomorrow). For example, in one of our experiments with Kiva, a no-fee lender, we increased loan application completion rates by 24%.

Getting people to improve their finances because of the long-term virtues of financial health is a difficult challenge, providing a more immediate reason to make a change today could make that easier

Another way to incentivize behavior today is by making the benefits and the progress both concrete and tangible. As we mentioned earlier, we worked with a free tax-preparation site in Queens, New York called Urban Upbound to increase referrals. We asked people who had just filed taxes to refer their friends and family. For some people, we asked them to refer without any incentives. For others, we offered additional motivation – free lottery tickets. If their friends and family came to the site, the filer and the friend were eligible to split the winnings. The lottery increased the number of people who made a referral from 13% to 18%. Furthermore, if friends and family received a tangible, physical ticket (not just a promise of a ticket), the number of people who came in from a referral increased five-fold.

How to use your referral card:

In another experiment, we partnered with the Community Empowerment Fund (CEF), a poverty alleviation non-profit, to increase short-term savings. In one condition, members made their savings deposits toward a savings goal.

In another condition, members were given a punch-card where CEF marked each time they made a deposit toward their goal. Over six months, members in the control condition saved 33% of their goal, while members in the punch-card condition saved 49% of their goal. The punch-card helped to visualize the progress and make the goal more concrete.



Financial decisions are complex and difficult. Given this complexity, we often look to those around us to get guidance about what we should do. We utilized this principle of social norms in a number of experiments.

First, we partnered with Ariva, the free-tax preparation site in New York City, to get people to save part of their taxes. We edited some of the forms to include explicit social proof, stating that most people save 25% of their refund. This intervention led 9% of filers to check that they wanted to save 25% of their taxes, compared to just 3% in the control.

Make it Social!:
“The wisdom of crowds.”

-James Surowiecki

Explicit social proof messaging increased savings intentions at tax time

In other conditions, We used implicit social proof, stating that it was not recommended to save 0%. This intervention increased behavioral intentions to save from 22% to 29% of their tax refund, a 32% increase.

In a related tax-time experiment, we partnered with another free tax preparation site, United Way of Tucson and Southern Arizona. For this experiment, we wanted to increase the number of people who used the scan-and-go filing service. In one condition, we gave people implicit social proof, stating who should use Valet Vita (i.e. busy people who need to get back to work). The decision aid increased use of Valet Vita from 16% to 28%, a 75% increase.

Lastly, we partnered with a discount company called CoinFlip to increase the number of people who get grocery discounts. In our email experiment, we had two conditions. One asked users to sign up. The other asked users to claim their discounts.

This is a common technique used by organizations to get people to spend more. Could we use this tactic to help people spend less? The claim messaging increased open rates from 26% to 31% and click-through rates from 11% to 15%, leading to a 19% and 32% increase, respectively. We believe one of the reasons the claim messaging outperformed is because the word “claim” signals both a sense of ownership and scarcity.

The claim messaging increased open rates from 26% to 31% and click-through rates from 11% to 15%, leading to a 19% and 32% increase, respectively


We often have existing mental models for how we think about our finances. We can utilize these pre-existing mental models to help people improve their financial well-being.

For example, many of us think about our auto loan payment as roughly being $250, not, $242.13. To take advantage of this, we asked EarnUp consumers to pay a little extra on their loans by “rounding up” their payments to the nearest $50.

This “round up” framing led to a jump from 11% to 15% of users increasing their payments; that is a 35% increase in people paying off their mortgage faster. As we discussed earlier, we used a similar framework with Latino Community Credit Union to help borrower’s round up their loan payments to the nearest $25 or $50 and put the extra payment into a savings account.

Make Use of Existing Mental Models!:
“Don't push the river, it flows by itself.”

– American Proverb

A round up framing can lead to over $8,000 in interest savings on a person’s mortgage.

Aside from rounding up, we often think about our budgets on a weekly basis. Yet, we often get paid on a monthly or a bi-weekly basis, increasing the difficulty of budgeting. To help users budget for food, we partnered with Propel, a fin-tech app for those receiving SNAP (Supplemental Nutrition Assistance Program) benefits, formerly known as food stamps. We found that providing users with a weekly recommended budget helped to smooth out their consumption by extending their SNAP benefits by two to three more days.

Lastly, employees and workers are used to thinking about their wage either on an hourly basis ($15/hr) or an annual basis ($30K / year), depending on how they are paid. Research in our lab suggested that when people are told their wages in hourly terms, it puts people into a short-term mindset while putting their wages in annual terms puts them into a long-term mindset. We utilized this framing to help independent 1099 workers to save part of their income towards retirement. Of the users who clicked on the email, 56% opted to save when they were told how much they would likely earn this year compared to just 43% when they were told the average they were making per job.

56% opted to save when they were told how much they would likely earn this year compared to just 43% when they were told the average they were making per job

Not everything works as we hope!::
“What you think is right isn't the same as knowing what is right.”

E.A. Bucchianeri

And sometimes our intuitions are wrong

We are researchers. As such, we try to test our intuitions and assumptions every chance we get. And sometimes, our intuitions are wrong. And that’s where we get excited! It reminds us of the importance of testing. We learned key lessons from some of our notable experiments with some great null results.

As discussed earlier, we partnered with Ariva, a free tax filing site in the Bronx, to help filers save part of their taxes. We changed the deposit forms to include both explicit and implicit social proof. While our intervention did impact behavioral intentions, it did not impact actual savings rates. We didn’t make it easier for people to save.

This was a somber reminder that we had only addressed one small barrier, which wasn’t the largest or most important barrier to tax-time savings

In order to save, the tax preparer, the volunteer that completes the person’s taxes, needs to file an extra form (Form 8888). We found that many preparers didn’t know about the Form 8888 and if they did, they were hesitant to add another step in the process. This was a somber reminder that we had only addressed one small barrier, which wasn’t the largest or most important barrier to tax-time savings.

In a second example, we partnered with Promise Indiana, a youth development organization, to remind parents to make deposits into their children’s savings account (CSA) balances. We sent thousands of reminder postcards, varying the message across three different conditions. When compared to a control group that did not receive a postcard, none of our experimental conditions increased deposit rates. Even if you received a reminder to make a deposit, the process to make a CSA contribution is still cumbersome.

We also partnered with Duke Credit Union to help members increase their short-term savings. In our experiment, new members were automatically given a “Rainy Day Savings Account”, which members could refuse if they wanted to. While over 50% of members kept the savings account, we found little impact on actual savings behaviors. We made saving a bit easier, but we didn’t fully automate ongoing deposits. It still took effort to save.

We partnered with Navicore, a credit counseling agency, to increase the number of people who sign up for the service. We changed the counselors’ scripts to convey expertise and empathy. Our intervention increased trust in the counselors, but it didn’t increase conversion rates to Debt Management Plans (DMP). While building trust was important, our results suggest that there are other barriers that need to be addressed. Participants may still have concerns about what a DMP will do to their credit scores, their cash flow, or their access to credit.

Lastly, we ran a study with Digit to increase savings at tax-time. In that experiment, we included conditions that changed the way in which we talked about the refund. In one condition we discussed the tax refund as “getting some of your hard-earned money back.” This framing lowered savings rates. We tried to go against existing mental models of how we think about our tax refunds (bonuses vs. refunds), and it backfired.

Dissemination of Research

A core part of our mission is to disseminate our research broadly to practitioners to help them apply our insights to their own work. To this end, we hosted two conferences in the U.S. with over 105 industry experts from 53 different organizations, four webinars, five summer series, and 16 office hours with promising fin-tech organizations. In addition, we’ve released six press releases, written 11 articles, and were mentioned across 27 media outlets including Bloomberg, Scientific American, Forbes, and TechCrunch. We’ve also presented at over 30 national conferences for academics and practitioners alike. Our work is also being used to teach business students both at Stanford’s Graduate School of Business and Harvard Business School.

  • Immersed 105 industry experts
  • Featured in 27 media outlets
  • Wrote 11 articles
  • Hosted 5 summer series
  • Held 16 office hours with promising fin-tech organizations

Conclusion

This report covers all of our 2017 projects, detailing our processes, original hypotheses, experiments and results. We encourage you to read through each case study and ask yourself how you can apply the insights to your organization.

Going forward into 2018, we are excited to continue our work with our 2018 cohort. Over 100 organizations applied, and after a rigorous screening process, we expect to partner with 14 organizations, including credit unions, startups, non-profits and local governments.

Interested in learning more?

This report covers all of our 2017 projects, detailing our processes, original hypotheses, experiments and results. We encourage you to read through each case study and ask yourself how you can apply the insights to your organization.

Going forward into 2018, we are excited to continue our work with our 2018 cohort. Over 100 organizations applied, and after a rigorous screening process, we expect to partner with 12 organizations, including credit unions, startups, non-profits and local governments.

Interested in funding our work? Please reach out to wendy@commoncentslab.org

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