Imagine you have just paid for a full tank at a petrol station. A message flashes up on your phone screen reading: ‘Did you know this purchase is equivalent to over 200 kg of carbon? You could save over half of that by using more public transport.’
This is a service that Cogo, a carbon impact platform, provides for some mobile banking apps, such as NatWest, with the aim to help inform – and change – customer thinking and behaviours. And whilst 8 in 10 in Europe are willing to make changes in their lives to help combat climate change, only 2 in 10 actually know how to act on this aspiration.
Given the wealth of data they hold, banks are very well placed to provide timely and personalised advice on sustainability of our purchases. Moreover, because financial difficulties pose a major barrier in the adoption of green technologies – like electric cars or heat pumps – banks have a natural role to play in this space. That is why BIT partnered with Cogo to explore how banks should go about nudging their customers to go green.
Taking a behavioural approach has a lot to offer in dealing with this challenge. It can help us understand the barriers (such as lack of awareness, opportunity or financial resources) customers face when adopting more sustainable behaviours, as well as shaping possible solutions.
Going back to our EAST framework, Cogo-style carbon impact prompts after transactions are intrinsically very behavioural: easy to receive from banks by default, attractive by being personalised to reflect emissions generated by your transaction and being delivered at timely moments, at the point of purchase. The question is how will customers react and what more, beyond the provision of information, could banks do in this space?
How could banks nudge their customers towards sustainability?
We ran an online survey with a sample of 2,007 UK mobile banking users, looking at customer attitudes, testing a series of potential offers that banks’ could introduce to encourage pro-environmental behaviour change, as well as ways of optimising Cogo’s UX to achieve maximum impact.
In collaboration with Cogo, BIT developed a longlist of potential offers – financial solutions, consumer protection, prompts and incentives – banks could use to encourage their customers to use more public transport, buy an EV or switch to a greener energy provider. Participants in our online experiment were randomly allocated to see 2 of 6 hypothetical pro-environmental offers:
|Pro-environmental bank offer||Description|
|Prompts for energy switching||The bank sends you prompts based on some of your bank transactions with helpful information (for example, suggestions to save on energy bills and moving to a green energy supplier). The bank would not send this to you all the time but rather at certain moments in time like when you move home or at the start of the year.|
|Exclusive bank card||The bank offers you a special green bank card if the carbon footprint of your transactions is below a certain threshold. This card would entitle you to perks and exclusive discounts in selected stores.|
|Train miles||The bank introduces a reward scheme where you can collect points for travelling by public transport, for example, an air miles equivalent to “train miles”. Once you’ve accumulated enough reward points, you can use these to pay for travel tickets and other available items.|
|Loans for eco purchases||The bank starts providing fixed low interest loans specifically designed to help you pay for things that help the environment (heat pumps, insulation, electric vehicle)|
|EV trials||The bank works with car manufacturers to let you trial an electric vehicle for an extended period of time at no cost, before you decide whether to buy it|
|Protection for second hand purchases & repairs||The bank encourages you to consider purchasing second hand or repairing your current products by offering you guarantees to get your money back for faulty goods, as well as affordable product warranties|
Table 1. The pro-environmental bank offers we developed and included in the survey.
What did we find?
- Almost 9 in 10 consider the environment when making purchases. Further, people consider the environmental impact of their spending most for food, fuel and flight purchases.
- 6 in 10 support their bank helping them reduce their environmental impact and 7 in 10 support their bank reducing their own environmental impact. The biggest barriers to accepting advice or support were that it’s not banks’ responsibility (33%), data privacy concerns (25%) and availability of support elsewhere (20%).
- The specific behaviours for banks to target are those that have a relatively higher environmental impact and that customers are most willing to do. These were switching to an EV, minimising home energy use, adapting homes, switching to renewable energy and investing in green financial products.
Figure 1. Demand for support and willingness to adopt pro-environmental behaviours by impact
- Of the pro-environmental bank offers we tested, the Exclusive bank card (which involved banks offering a green bank card to customers with low carbon footprints and entitled them to perks and exclusive discounts) and Train miles (which involved banks offering a reward scheme for travel by public transport, for example, train miles) performed best in terms of uptake, willingness to be offered through their mobile banking app and willingness to allow their bank to use their transaction data.
After seeing screenshots of Cogo’s UX, 6 in 10 participants would like to receive this information from their bank. Of those who would not, 7 in 10 would support banks providing this information if they could opt-out or hide it.
Figure 2. Screenshot of Cogo’s UX showing carbon footprint information based on transactions
What does this mean?
Together, these findings serve as a strong indication that banks have a licence to operate when it comes to introducing carbon feedback on transactions. To seize this opportunity, we recommend that:
- Banks should nudge customers to take the sustainable actions that people are most willing to take. Our results suggest the initial focus should be on behaviours related to energy, green finance and EVs, using small reward programmes and incentives as a means of encouraging these sustainable behaviours.
- Banks should try to educate their customers around their ability to help encourage sustainable behaviours. Although only 2 in 10 expect their bank to inform them about sustainable behaviours, 8 in 10 want to know more about the environmental impact of their spending. As a means of boosting their legitimacy as a trusted messenger in this space, banks should lead by example by highlighting their own efforts to reduce their carbon footprint within their own operations and their investment portfolios.
This is but the beginning of a new exciting venture. Behavioural insights could play a big role in helping businesses such as banks to help support their customers’ greener choices. In fact, as many as 88% of people expect brands to help them be more environmentally-friendly and more ethical in their daily life.
The full report can be accessed here.
If you are a bank or a business interested in helping customers to become more sustainable, please contact BIT to explore opportunities to collaborate.