The UK Financial Conduct Authority has released several papers over the last three years on the use of behavioural economics in policy (I would particularly recommend their first paper on this for a very useful overview of behavioural economics)e. Their latest paper is available here (summary below). It summarises a range of experimental evidence from trials they have conducted on behavioural aspects of retail financial markets in the UK. The publication of such a range of experiments, many of which do not find evidence for the effects tested, is very welcome and a further step toward what a mature use of behavioural evidence in public policy should look like. It is also particularly welcome to see a body such as the FCA cite the work of scholars such as Nancy Carthwright and Angus Deaton in calling for a more contextualised integration of randomised trial and other types of evidence into public policy. The usefulness of behavioural interventions in financial regulation is still wide open for debate, in particular the optimal mix of hard and soft interventions in regulating markets with high degrees of confusion and potential for exploitation.
The FCA has been at the forefront of using behavioural science and experiments to inform regulation. Since our first field trial on customer compensation in 2013, we have published the results of experimental research in a number of consumer markets including savings accounts and structured savings products, along with car and home insurance.
This round-up paper presents a further eight experiments, comprising five field trials and three online experiments, which test the effect of interventions that draw on behavioural theory, such as increasing salience or personalisation.
We investigate diverse questions including:
How can we design disclosure about annuities to help people get a better deal?
How can firms improve customers’ engagement with their mortgages?
What messages encourage customers to claim compensation?
How can compliance and engagement amongst regulated firms be improved using communications?
While some experiments corroborate existing research or find interesting effects, others did not find any statistically significant effects. We are publishing these results, including non-significant and negative results, in the spirit of good research so that we can improve evidence, combat publication bias and make our research transparent. We also share some of the practical lessons we have learned, in the hope that others may benefit from them.
The author works in the Behavioural Economics and Data Science Unit in the Strategy and Competition division of the FCA.
Paul Adams, Matteo Aquilina, Robert Baker, Will Brambley, Alessandro Nava, Sumedha Pathak, James Ridgewell, Helena Robertson, James Shafe, Laura Smart, Dom Suckling, Roisin Wilson and Qamar Zaman.