The EU Policy Lab was invited to speak in London, during a joint OECD (Organisation for Economic Cooperation and Development)-FCA (Financial Conduct Authority) 2-day conference on “Discovering what works: Building research into practical regulation for consumer financial protection”. The event was well attended, with just short of one hundred participants from 34 different jurisdictions.
The event was an opportunity to share knowledge – and even gain direct exposure through amusing hands-on experiments – on the application of behavioural insights to financial consumer protection. After all, it was rightly argued, we can only improve people’s lives if we can turn the most relevant academic findings into action. Financial consumer protection was indeed largely based on disclosure, meaning on providing consumers with ever more (often complex) information. The evidence shows that such approach was largely ineffective and sometimes counterproductive. The “consumers-know-best” type of approach would work in an ideal world of econs, not in the real world of time-poor consumers, often unqualified to digest complex information.
Innovative behavioural research can be conducted on existing data sets
The conference had several specific sessions (e.g., on disclosure; smarter customer communications; effective consumer surveys; collaborations among policymakers, academics and industry; risk; responsible borrowing and de-biasing), and generated lively discussions around the respective themes. Among the various sessions, I think Brigitte Madrian (Harvard Kennedy School) gave possibly the most insightful speech of the whole conference. She stressed that policy changes provide interesting opportunities for researchers, that research sometimes feeds well into the policy processes and that there is ample opportunity for analysing existing datasets, owned and managed by public institutions. Brigitte’s overall message was that there are other instances where innovative behavioural research can be conducted on existing data sets, owned by public institutions.
Designing policy solutions that work for humans
Other keynote speeches included one from Nick Chater (Professor of Behavioural Science, Warwick Business School; Advisory Board of the Behavioural Insight Team), on behavioural psychology and a one by David Halpern (National Advisor on What Works and CEO of the UK Behavioural Insight Team), who concluded by encouraging the participants: “Let’s play to the strengths of humans, not to the fantasy of econs”, implying that policymakers and regulators should design policy solutions that work for humans, not to unrealistic artefacts such as the homo oeconomicus.
Well done to all participants for sharing their respective views and experiences and to the organisers for hosting such a useful conference. Let’s hope that innovative approaches will continue to be tested in financial consumer protection and that, in the future, consumers will feel better protected and will have better experiences.