A few companies in financial services have started to understand the importance of behavioral analytics and that has given rise to the post of Chief Behavioral Officers (CBO).
With increased attention to customer behavior and the increasingly key factor of complete focus on enhanced customer experience, most financial sector companies are now creating a new leadership position in the space. The new job of the Chief Behavioral Officer (CBO) is to leverage aspects of behavioral sciences to create and add to customer-focused strategies.
Experts have observed that customers are sometimes irrational about buying decisions and an understanding of behavioral sciences can help comprehend the biases and preconceptions that affect them. Creating a post at that level is to meet the need for an in-depth understanding of customer challenges and business, which can be grasped fully only by internal teams.
Understanding ‘Human Beings’
Psychological science and behavioral economics have expanded their reach to be a part of business, regulation, and policymaking. Within marketing too, behavioral economics has become a required area of expertise.
In a company, the CBO becomes an advocate for the ‘human at the center’ of every policy and program. A CBO can engage in data science, as well as analyze resources to identify measurable outcomes.
CEOs are becoming aware of this requirement as it is not only to understand consumer behavior but also how behaviors can be steered cost-effectively and add value. There are a few leading brands and top of the line companies who do have this post but under different names. Some of these include Bank of America’s Behavioral Finance Analyst, HSBC’s Senior Manager in Behavioral Economics, Capita has a Senior Manager in Behavioral Insight and Intelligence among others. Most of these positions often become a part of the internal team when the company is growing and leaders develop into CBOs as they fill the need around knowledge, experience, and competence in the behavioral sciences.
Behavioral Science as a Strategic Tool
Recently American investment management company, Merrill Lynch used behavioral sciences to steer the financial decisions of their users. They asked users to upload their photos and ran a program to show what they would look like in 30-40 years. This made them more conscious of their retirement planning and resulted in a shift in their financial behavior. In another case, the Commonwealth Bank of Australia launched an app to set goals for customers in February. The app prompted the customers to set personal saving goals and showed a path to reach them. Since then, over 250,000 goals have been created.
Data analytics startup studied the psychological responses from a potential borrower to assess their trustworthiness. Using behavioral sciences, they evaluated the intention of the borrower to repay a loan. Their ML-powered algorithm used these inputs on a few basic lifestyle questions and asked users to choose favorites between some bunches of images. Finally, it gives a rating indicating the customer’s ‘intention’ to repay.
There are many opportunities and issues to which behavioral economics can be applied at both the strategic and execution level. Explorations on the real potential of the insights of behavioral science have just started.
By the next decade, analysts say, behavioral and accurate assessments of customers based on behavioral science will become an essential part of the regular conversation around board tables.
