Tag: Behavioral Economics

What Happens When Your Bank Blames The Competition

Accountability in Banking

It is easy to place blame on items outside of your control – competition, interest rates, bad luck or a million of other reasons. However, a hallmark of a good banker is their ability to take responsibility for actions, be humble and take steps to ensure future success. While there are qualitative reasons why this is true, in this article we will look into the quantifiable reasons why banks and bankers that take responsibility for their actions are better served.

 

The Study

 

How To Present A Menu Of Bank Prices

Bank Research

Three social scientists, Suk, Lee, and Lichtenstein, walk into a bar… No joke, they do, and they observe patrons for eight weeks and watch how they order off specially designed beer menus. One beer menu has a variety of beers ordered with prices from high to low. The other beer menu has a menu of beers ordered with prices from low to high. Are the results the same? How does it compare to a randomly ordered menu? Does it really matter? And, most importantly, what happens if you did the same test for banking?

 

Why Your Bank Needs Prices On Its Website

Marketing price for banks

Banks fall into two categories – those that display pricing on their website and marketing materials and those that don’t.  Most banks don’t put pricing on their website and use a variety of reasons – pricing is complicated and is best discussed in person, all our pricing is customized, we don’t want our competition to see it, and, our favorite, we have never done it that way. If your bank falls into this category, then read on because the chances are that tactic is hurting you in more ways than you know.

 

A Bias In Your Loan Approval Process (Part II)

In Part I of this post (HERE), we discussed the Gambler’s Fallacy and how the loan process itself can inject bias into a bank’s decisioning. In particular, we looked at how the order of how loans are reviewed for credit makes a difference. This sequence bias comes from an inherent cognitive belief in humans that want to assume the world is less random than it is. Flip a coin enough times, and every time the result is heads in a row it is natural to assume that tails are due.

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