Common Cents Lab 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 economics to create interventions 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.
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 our website.
At MetLife Foundation, we believe financial health belongs to everyone. We bring together bold solutions, deep financial expertise and meaningful grants to build financial health for people and communities that are underserved and aspire for more. We partner with organizations around the world to create financial health solutions and build stronger communities, engaging MetLife employees to help drive impact. To date, our financial health work has reached more than 6 million low-income individuals in 42 countries.To learn more about MetLife Foundation, visit metlife.org.
BlackRock helps investors build better financial futures. As a fiduciary to investors and a leading provider of financial technology, our clients turn to us for the solutions they need when planning for their most important goals. As of December 31, 2018, the firm managed approximately $5.98 trillion in assets on behalf of investors worldwide. Twitter | Blog | LinkedIn
Notes from our partners
For most of those served by the financial health sector, 2020 appeared to have far more snakes (or chutes) than ladders. The year started somewhat hopeful, with renewed attention to the ladders needed to help close the wealth gap. Then came the extralong snakes of the pandemic – both a health crisis and an economic crisis, all rolled into one – followed by a racial reckoning. Ladders seemed to be fewer and shakier, and by the time the “she”cession emerged in December, the dice seemed loaded against progress for low- to moderate-income populations, particularly Black/African-American, Latinx, Asian American and Pacific Islanders, and many other underserved communities.
Through it all, the financial health sector continued to identify opportunities to serve – and even grow – their customers, with savings finally demonstrating the beauty of resilience. Of course, the pandemic was not a one-off event and even great savers found themselves in need of support. Fintechs, nonprofits, social enterprises, and for-profit financial health sector stepped up with financial coaching, providing assistance to those seeking to navigate stimulus payment requirements, PPP loans, and carefully considered credit.
The CCL team weathered the switch to virtual and, together with their partners here in the US, Mexico, Turkey and China, were able to keep (most) things moving. Maybe there were fewer long ladders of progress in most of the experiments, but there were also shorter snakes. In a few instances, the dice were taken off the table for a while, but our partners and their clients are coming back to the game table, ready to move up the sturdier ladders.
We encourage readers to dive into this volume, which showcases a few of the ways your peers and colleagues have worked with Common Cents Lab to serve the consumers we are passionate about serving.
While we certainly can’t predict the future, the vaccine rollout and the re-opening of the economy is a hopeful sign that “luck” might be changing. To mix a metaphor, we’re collectively putting our finger on the scale by using behavioral science to enable low-income folks the opportunity to climb few more ladders and roll right past the long snakes.
When we initially designed BlackRock’s Emergency Savings Initiative in 2019 to help people living on low to moderate incomes build and access emergency savings, we had no way of knowing that a global pandemic would underline the issue of emergency savings in such drastic relief. We were grateful to be in a position to make substantive contributions to the national conversation as the world changed overnight because we and our expert partners were already thinking about and working on the problem.
Common Cents Lab was among our partners already focused on tackling the emergency savings crisis. CCL’s expertise in applying behavioral science to financial products and services – identifying the barriers that stand in the way of setting money aside as a financial cushion and designing the tools and features that make saving as frictionless as possible – was a crucial component in our undertaking to increase financial wellbeing through collaborative solutions. CCL’s dedication to experimental design and rigorous measurement gave the initiative confidence in the insights we’ve been learning through our work together. As the U.S. government responded to the pandemic with unprecedented economic stimulus and the regulatory and policy landscapes shifted to address emerging challenges, behavioral science kept reminding us that there were already important ways to intervene all around us.
The case studies represented here paint an interesting picture of pursuing financial wellbeing in the midst of a pandemic. There are disrupted timelines and some unexpected outcomes, but woven throughout is also the story of community financial institutions, nonprofits, financial tech companies and others whose commitment to improving the personal financial lives of their users, members, customers, and employees remained resilient amid a world in turmoil.
Now is the time to harness this momentum to reach a tipping point where critical systems – from the workplace to the financial services industry to public policy – fully embrace emergency savings as a core priority.
How to read this report
Our Annual Report is where you can find summaries of the most recent year’s projects detailed in our case studies: you’ll see the problems we tackled, hypotheses we formed, interventions we launched, and questions we addressed. Each case study was designed and tested by the Common Cents Lab and was aimed at increasing financial health around the US or abroad. This Annual Report, similar to our previous ones, is divided into five sections, each focusing on a different aspect of financial health:
While we would love for you to pore over every detail in each of the five sections, we know a thing or two about time and attention scarcity, and realize that some of you may choose to browse this report.
If you do browse, we have 3 recommendations for getting the most from this Annual Report:
- 1 Read the section summaries.
- 2 Think about how they relate to your big questions at work or at home.
- 3 Consider how these different sections and case studies relate to each other.
Have you ever walked into a room and suddenly wondered what prompted you to go there in the first place? Maybe you’ve experienced the digital version of this at some point: finding yourself on a random Wikipedia page with no memory of what led you there.
It was just such an experience—reading the history of the game “Snakes and Ladders”—that led to the cover design of our 2020 Annual Report (which you can print and play, if you’re so inclined). Over the centuries it has existed, the game has reinforced a variety of moral lessons on the various virtues and vices that can lead someone to be successful or to fail. Beyond that, the dominant force in the game is luck.
Black and Brown Americans were 2 to 3 times more likely than white Americans to experience food insecurity or inability to pay rent.
Low-wage industries lost jobs at nearly four times the rate of high-wage industries.
The unemployment rate in the US spiked to 14.8% and ended the year at 6.7%, double where it had been a year earlier.
We also know that in real life the snakes and ladders are typically not virtues and vices, but systems that—whether poorly-designed or well-designed to benefit some and exclude others —make it easier or more difficult for people to improve their financial wellbeing.
On our list of common misfortunes to plan for, here’s one we likely wouldn’t have thought of before 2020: global pandemic. Yet it has upended the lives of millions of people—sending them back to square one in any number of arenas, but certainly including financial wellbeing.
Common Cents Lab 2020 Highlights
Helping LMI households overcome the effects of scarcity which were heightened by the pandemic was a key focus of our work in 2020, and we approached this problem with three primary strategies to build more and better ladders:
Draw attention to important but less urgent priorities to overcome tunnelingRead more
Automate tasks to restore cognitive bandwidthRead more
Provide scaffolding to simplify complex decisionsRead more
Draw attention to important but less urgent priorities to overcome tunneling
We have so many competing priorities for our time and attention, that it can be difficult to stay on top of everything we need to do to become financially well. Organizations can use well-timed messaging to make sure users don’t let these things fall by the wayside.
One of the most critical elements to achieving financial well-being is to have some savings available for emergency expenses. We drew users’ attention to this critical priority across several different organizations. For example, in an experiment with Qapital, we found that a prompt about emergency savings during user onboarding more than doubled the number of users that created an emergency savings goal. Similarly, at a credit union, we prompted members to set up a Rainy Day Savings Accounts, with about a quarter of the members taking up the offer. In the area of retirement savings, we highlighted the importance of maintaining retirement savings accounts with a message on the Ascensus user home screen to encourage users to use their retirement savings projection tool.
We’re also continuing to capitalize on the success of prompts in the designs of new interventions. For example, we have designed a pop-up for Inclusiv member credit unions to prompt members to set up automatic transfers into an emergency savings account. And we’ve incorporated a prompt for users to set up emergency savings as a key step toward financial wellness within the financial technology company MX’s FinStrong app, a feature which is expected to launch in 2021. In Mexico, working with fintech Albo, we also co-designed a digital pocket, “Espacios”, to encourage their customers to save for emergencies.
In an experiment with Qapital, we found that a prompt about emergency savings during user onboarding more than doubled the number of users that created an emergency savings goal.
Additionally, we are providing reasons for households to take action on these important but not urgent tasks today. In Mexico, working with credit repair company Cura Deuda, we designed an intervention where users who made their debt payments on time, entered a contest to get a chance to have their debt repaid in full. In Turkey, where credit card usage is rapidly growing, we are working with Findeks to find ways to help users pay their debts on time so they can improve their credit scores.
Automate tasks to restore cognitive bandwidth
Keeping track of everything in a complex environment is hard. It’s even more challenging for LMI households who faced some of the greatest hardships caused by the pandemic, like reduced income paired with higher expenses. On top of all of that, scarcity adds its own tax on cognitive bandwidth. Automating financial behaviors can help lighten the load. We’ve helped make saving money for the short term easier with automation; the prompts mentioned above for Qapital, a credit union and Inclusiv all connected users to one-time set-ups for on-going transfers into savings. We are also looking at how to improve take up of the Split and Save product at Park Community Credit Union, which will allow users to automatically save a portion of large electronic deposits into their account; our intervention will look at immediate versus delayed action and the use of a default recommended savings percentage.
Automation is also valuable in the loan repayment space, to help users maintain good credit. At Beneficial State Bank, we found that texting people a form to align their automatic loan payments with their pay cycle doubled the uptake of the payday-payment alignment. We’re also working with fintech Colendi to encourage borrowers in Turkey to make their utility bill payments through their app.
At Beneficial State Bank, we found that texting people a form to align their automatic loan payments with their pay cycle doubled the uptake of the payday-payment alignment.
When automation of some financial behaviors is not feasible, then reminders can be an effective alternative. For example, with the nonprofit financial planning firm Justine Petersen, we are currently testing text reminders to encourage timely loan repayment by small business owners. At a credit union, we are trying a variety of communication methods – from emails to refrigerator magnets – to increase borrowers’ on-time loan payments. In a separate experiment with a credit union, we are pairing payment reminders with offers of financial counseling. In China, we are designing interventions to increase earnings and decrease medical expenses among low-income patients by prompting them to enroll in a medical expense reimbursement program.
Provide scaffolding to simplify complex decisions
People often benefit from tools to help them make sense of the complexity in their finances. In a financial health assessment with Washington State Employees Credit Union (WSECU), we help members prioritize what part of their financial health they should focus on first; we are comparing how numerical or descriptive scores help users understand their financial well-being and encourage members to take action for improvement. At credit counseling provider MMI, we are testing a new way for counselors to interact with clients, focusing on empathy, expertise and social norms, to encourage clients to complete debt counseling. At Schools First Credit Union, we are testing how best to use rules of thumb in communications to members to get them to pay down debt more quickly. We are also helping people understand when they need to make corrections to spending with asymmetric feedback with Branch.
Some complex decisions carry additional weight because they are hard to correct if we make the wrong choice. At Alight, we are testing a timely prompt to help people understand the long-term financial trade-offs of making hardship withdrawals from workplace retirement accounts. This prompt is meant to provide a moment of deliberate thinking around a crucial decision that may lead people to decrease withdrawals from their future self. At Patelco Credit Union, we created a calculator for their credit builder loan to help members understand the true cost of their loan payments without stretching their budgets too thin.
At Digital Federal Credit Union, we guided members to put reductions in loan payments from loan modifications or consolidations towards savings.
We also recognize that finding money in tight budgets for savings can be challenging, so we recommended that people use unexpected windfalls to jumpstart savings. At both WSECU and Digital Federal Credit Union, we guided members to put reductions in loan payments from loan modifications or consolidations towards savings. At Virginia Credit Union, we similarly, redesigned the redemption portal to encourage members to put their credit card rewards towards savings.