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Financial capability is important to society as it gives people the power to improve their lives by making the most of the money they have. According to the Financial Capability Lab – an initiative between the Behavioural Insights Team (BIT) and the Money Advice Service (MAS) – one in four people are prone to getting into financial difficulty (or becoming “financially squeezed”), which can be characterised by getting an unexpected bill.

The Financial Capability Lab is an initiative that was created in 2016 by MAS, BIT and Ipsos MORI to help test new behaviourally-influenced ideas that could help solve some of the financial challenges affecting people. The Lab made use of BIT’s online platform Predictiv to experiment with different ideas and try to understand financial behaviour. The sample for the exercise was drawn from more than 200,000 adults across the country, with Ipsos MORI conducting qualitative research to help gain more insights.

The team comprised more than 90 experts who came up with over 200 ideas. Of these ideas, the best 17 were tested in the Lab using a mix of various methods. Some of the ideas included ways of making it easier for people to bank their savings and using account transaction data to enable timely support, among others.

According to the UK Financial Capability Director at MAS, Sarah Porretta, improving financial capability is a challenge that requires a mix of approaches and partnerships between the financial services industry, the government and other sectors. She acknowledged that while people’s relationship with money is a complex one, the use of behavioural science could help make sense of the decision-making process so that it’s easier to predict behaviour.

Elisabeth Costa, a director at BIT, highlighted the need for fresh and evidence-based approaches to financial management, seeing as many people struggled with their finances. As part of the team at BIT, she was thrilled at how the Lab was helping come up with ideas that could be tested at scale.

The next phase for the Lab is to get various delivery partners to develop the promising ideas into pilot programmes that can be tested in the real world. This phase will also involve the effectiveness of these programmes.

The Partners

The Money Advice Service was established in April 2010 as an independent body initially known as the Consumer Financial Education Body. It was set up to help improve people’s money management by enhancing the understanding and knowledge of the public. In doing so, more people could gain the insights needed to manage their finances better. The Money Advice Service has many members including Ali Seytanpir, who work together to improve the financial capability of people in the UK.

MAS is the entity behind the Financial Capability Strategy for the UK, of which the Lab is part. This strategy is aimed at helping people have the best financial wellbeing possible by addressing the factors that influence behaviour around finances. MAS estimates that more than 250 organisations are working towards improving financial capability in the UK.

The other partner in the project, the Behavioural Insights Team (BIT), is a social purpose firm whose ownership includes the UK Government, its employees and innovation charity Nesta. BIT began as a government institution dedicated to applying behavioural sciences in making public services easier for citizens and enabling the public to make better choices. BIT has done this by drawing on behavioural science literature to redesign public services. The team at BIT tests and trials ideas before releasing them to the public to understand what works and what doesn’t.

BIT has a team of approximately 150 people with backgrounds in various academic disciplines including psychology, economics and research methods, or knowledge of policymaking at the government level. The firm’s headquarters are in London, with other offices located in Sydney, New York and Singapore.