Getting People to Save "By Default" - Research by Poverty Actions
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A Poverty Action study in Afghanistan found that automatically opting employees into savings increased participation by 45%, demonstrating the powerful impact of "defaults" on behavior. This insight is crucial for founders and investors, especially in fintech, as it highlights a simple yet effective strategy for driving adoption and building financially accessible solutions by designing products that encourage saving by default.
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Leveraging "default" opt-in mechanisms can significantly boost savings behavior, a powerful insight for founders building fintech solutions focused on financial accessibility.
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The research in Afghanistan demonstrates that even simple behavioral nudges can drive substantial engagement, highlighting the importance of user experience design in product development.
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For investors, understanding how behavioral economics impacts product adoption is crucial for identifying innovative fintech startups with scalable solutions for emerging markets.
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Founders should consider how to design products that naturally encourage positive user behaviors, such as saving, through intuitive defaults.
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Dan Ariely, famed Beahvioural Economist working with Lemonade, recently wrote on people’s motivation to save when they’re “automatically opted in”. In his post he cited research (December, 2015) on “Mobile-izing Savings With Defaults in Afghanistan” done by Michael Callen, Joshua Blumenstock, Tarek Ghani. The three of them have done extensive research in collaboration with Roshan, Afghanistan’s largest telecom network. Roshan’s employees were A/B Tested to save part of their monthly savings. Half of them were automatically “opted in” to save 5-10% of their monthly salary and the rest were automatically opted out (0% of monthly savings). The research goes on to explain how the study was conducted, what were the limitations to the study and that Roshan’s employee’s might not be indicative of Afghanistan’s poor. The findings from the study are astounding - 45% of people (automatically opted in) chose to continue with the monthly savings compared with those that were automatically opted out. That’s significant, considering how behaviour can be modified/controlled by a simple hack - “Defaults”
