Where is all the behavioural thinking in SME fintech?

Behavioural psychology and economics is a huge passion of mine. It combines three of my favourite disciplines – science, finance and psychology – so it’s hard for it not to be exciting. Plus, who doesn’t love understanding why we do the dumb things we do? Awareness then becomes an opportunity to undo them, or at least blame them for our bad money behaviour. Can’t save for the future? It’s hyperbolic discounting’s fault, not yours.

This morning our Chief Behavioural Officer at Zuper, Kris White, ran an amazing workshop on how financial product designers can apply behavioural economics (BE) principles. There are plenty of examples of behavioural economics principles and thinking being used in the consumer fintech world (Lemonade, Qapital, Decision Fish, Acorns etc), but very few (at least to my knowledge), in the small business space. However, that doesn’t mean there isn’t a need for this thinking to be applied here too. A potential opportunity for sure.

During the workshop I also jumped in briefly to talk through how we need to reframe traditional financial challenges and problems using BE, so we can find truly innovative and creative solutions.

Re-framing comes about when you use a tactic called ‘frame-storming’. I first came across this on a Fast Company blog post, and I’ve used it ever since to tackle product and marketing problems.

Let’s consider a typical small business owner challenge where we could apply frame-storming to come up with a route to a financial product – to pay yourself a wage or not. A Commonwealth Bank survey in 2016 suggested 50 per cent of SME owners opted to not pay themselves a wage one or more times over the course of a year due to cash flow issues.

If we took that question at face value, the simple solution would be to fix cash flow issues. But that’s hard, messy and there are many problems that hide within that problem. Plus – it’s where everyone arrives, because the answer is practically baked into the way the problem has been defined.

But if we reframed it, we would more likely than not come up with much more interesting product ideas that still helped to solve the problem. Some reframes will be good, some will be bad. But the point is, one could eventually lead to a breakthrough innovation.

Here is my crack at it below for the problem above:

“Let’s accept cash flow will be bad sometimes. How then can we help business owners prepare in advance for times when it’s tight?”

Jumping to solution stage, then here we could employ something similar to how the Qapital + IFTTT recipes work for rule based saving.

“How can we control personal expenses so that wage stress is less of an issue?”

Here we are thinking deeper into why not having money becomes an issue. Usually it’s because we can’t pay our bills. Well, if our bills are less, wage stress is less of an issue…

“How can we reduce our expenses automatically in the months our personal cash flow is weaker?”

Here we are adjusting our budgeting our outgoings in line with our incoming earnings. Maybe we need to cancel Netflix, Spotify and lock our Uber Eats app for the month, to avoid temptation.

Once you start down this path, it becomes evident there are multiple ways to skin what seemed like an insurmountable original problem. That’s why I love this technique, and why ultimately, many of the solutions can then be unpacked further with BE principles.

Happy frame-storming! And if you want to watch the BE session Kris did today, I’d highly recommend it. It’s available on our Facebook Page.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

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