Prevention is better than cure

This is the second instalment in the four-part series, Personal finance: A public health emergency, aiming to use the analogy of public health as a tool for finding solutions to improve both individual and institutional financial health. In healthcare, prevention strategies are essential for reducing suffering and preserving resources. Perhaps the same strategies could be used to set people up for financial success.

The wisdom of prevention being better than cure is a fundamental principle of modern healthcare, deeply embedded in the NHS’ Long Term Plan. The logic is obvious: if you reduce the chances of an illness occurring, you reduce both human suffering and all the costs associated with treating the affected person. That means reduced pressure on public services, a happier, healthier, more productive workforce, and, ultimately, a stronger economy.

The same surely applies to financial health: if you reduce the chances of financial harm occurring, you reduce both human suffering and all the costs associated with supporting the affected person. For the government, those costs are things like benefits. For financial institutions, those costs are, at best, smaller deposits and, at worst, defaults on debts. Avoiding these costs results in the very same benefits as mentioned previously.

Looking at preventative measures used in healthcare provides a wealth of ideas for the financial services sector. For example:

• Educational initiatives (e.g. promoting exercise, healthy eating, and early cancer detection)
• Communications regulations (e.g. advertising restrictions, packaging requirements)
• Incentivisation (e.g. health insurance products that reward healthy behaviours)
• Predictive prevention (e.g. diagnostic technologies predicting disease)

Each of these could be leveraged by institutions to improve financial wellbeing.

Educational initiatives

In the UK, nearly half (46%) of those who’ve suffered from financial problems said that poor money management skills played a part. And two-thirds of those aged 18-34 believe their situation would improve with more financial education.¹ The earlier that this financial education takes place, the better, but there are opportunities to support people across their lifetime. The Centre for Social Justice (CSJ) has 29 recommendations for interventions, spanning ‘early years’ to ‘older adults’. ¹

These recommendations place a great deal of responsibility on government bodies. But why not encourage (or require) the private sector to do what’s in their best interests? Most UK banks already have some kind of financial capability programme in place. The question is: how well are they working? And which strategies have worked best? An industry-wide (longitudinal) analysis of what really works to improve financial literacy would provide invaluable insight to both the public and the private sector.

As the CSJ points out, there is no shortage of high-quality financial education resources in banks and other institutions; the problem is distribution.¹ Perhaps banks could partner with charities, schools, or employers to deliver financial education at scale. Or maybe it doesn’t have to be banks that initiate the partnership. Employers often invest in physical and mental health benefits for staff but pay typically little attention to financial wellbeing. Why don’t HR teams get support from financial service providers to help their employees build better financial habits? For example, providing advice on optimising pensions or investments.

Educational initiatives don’t have to be formally delivered. There are some exciting developments in FinTech using play to grow financial awareness. For example, the money management app Goalsetter offers quizzes and videos to teach both children and adults about financial concepts and products.² They even have features like ‘Learn Before You Burn’ where parents can automatically freeze their kid's card until a weekly financial quiz is taken - a perfect example of a preventative measure in finance. This is especially relevant in a time when it’s increasingly easy to spend money (for example, on mobile gaming), and when financial advice is available in unregulated spaces (like TikTok), meaning people could be encouraged to take on high-risk investments (like crypto) without the knowledge to do so safely.

Communications regulations

In the UK, financial services communications are regulated by the Financial Conduct Authority (FCA). And the new Consumer Duty coming into force in July of this year will increase pressure on firms to ensure their communications ‘avoid causing foreseeable harm’.³ But, the Duty doesn’t provide detailed guidance on what this might look like. It’s up to the institutions - and the organisations that work with them - to decide. Again, strategies in public health might provide a useful source of inspiration.

• What’s the equivalent of banning junk food advertising before the watershed? Perhaps firms could invest in better identifying individuals with signs of vulnerability using both proprietary and third-party data or tools (e.g. CACI’s Vulnerability Indicators) and amend targeting strategies to avoid selling them inappropriate products.
• What’s the equivalent of deterrent messaging on cigarette packs? For higher-risk products like gambling or crypto trading, perhaps regulatory bodies could help organisations develop more salient warning labels, for example visualising the consequences of losing large sums of money.
• What’s the equivalent of the traffic light system on food packaging? Perhaps firms could use a traffic light system to help customers understand the level of risk for their circumstances or preferences. For example, when looking into mortgage, loan affordability, or Buy Now Pay Later products, borrowing amounts could be broken out as red, amber, or green.

Incentivisation

The health insurance provider Vitality incentivises customers to stay healthy by providing free gym membership and reward points for logging activity. Employers ‘incentivise’ healthy behaviours with initiatives like step challenges that have rewards for winning teams.

In theory, the government’s ‘Help to Buy’ scheme is a great example of incentivisation for good financial behaviour: customers receive a bonus only as a result of establishing a regular savings habit and using the money towards a home deposit. Perhaps an idea for a new savings proposition is ‘Help to Buy’ for specific savings goals: small top-up bonuses on the things like holidays, cars, and home renovation. By requiring that the money be used on a specific type of transaction, the scheme can’t be easily exploited.

Incentivisation doesn’t have to have real-world value. It could be the kind of emotional reward mechanisms used in gamification: congratulatory messaging, badges, or ‘streaks’ for behaviours like using a good balance of credit or improving a credit score (see e.g. Credit Karma), or not missing a payment.

Predictive prevention

Just as public health organisations use growing amounts of patient data to train models to predict heart disease, diabetes and other conditions, financial institutions use customer data to improve insurance pricing, reduce fraud, adjust credit limits and so on. Could they be doing a better job of using this data to share helpful insights with customers? Perhaps they could provide guidance on typical pitfalls to avoid or risk levels to consider for their unique circumstances. Or they could offer a ‘financial awareness’ course if a customer misses a few payments, much like a speed awareness course for drivers. No doubt the next generation of AI technologies offers amazing opportunities for predictive prevention in personal finance.

The NHS’s approach to predictive prevention sets out to be ‘person-centric’. Not just passively collecting & analysing data but inviting patients to provide additional information to build a broader picture, and then pointing individuals to extra support based on this data.⁴ Could financial institutions do the same? For example, inviting customers to take part in a programme to understand Britain’s financial health, which then provides guidance based on their circumstances. The resulting models could better help firms spot potentially vulnerable customers, and market the right products to the right people.

There are many other ‘prevention is better than cure’ ideas that don’t have direct parallels in public health. One example is positive friction: the introduction of a few extra steps or even a time delay to encourage customers to think more deeply about whether a complex or higher-risk financial product is right for them. Strategies in public health don’t have to be the only source of inspiration here, but it’s certainly a useful starting point.

Curious to explore this topic further? Check out Personal finance: A public health emergency for more insights and learnings.

In conjunction with this article series, we’ll be running workshops connecting people in industries like finance, healthcare, politics, design and beyond to expand on the emerging ideas and find opportunities to bring them to life. No matter what your role, we’d love to get you involved - please reach out to [email protected] if you’re interested.

References

1. ‘On the Money: A roadmap for lifelong financial learning’, The Centre for Social Justice, 2022. Available at: https://www.centreforsocialjustice.org.uk/wp-content/uploads/2022/06/CSJ-The_financial_education_initiative.pdf.
2. https://www.goalsetter.co/financial-services.
3. A new Consumer Duty. Feedback to CP21/36 and final rules.’ PS 22/29. The Financial Conduct Authority, July 2022. Available at: https://www.fca.org.uk/publication/policy/ps22-9.pdf.
4. ‘Prevention is better than cure’, Department for Health and Social Care, 2018. Available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/753688/Prevention_is_better_than_cure_5-11.pdf.