Case study: How might we design an app to nudge financial literacy?
A dummy project on UX Research | Property Investments | Sweden
Every problem is an opportunity for design. But if the target group doesn’t acknowledge the issue, there is no need for a solution, designed or not. The good thing is that with UX Research’s toolbox, we have a window of opportunity.
This is the story of how I, during a couple of weeks in March 2021, used the UX toolbox to study how Swedes assess the financial risk when buying property on the Swedish housing market.
Housing cooperatives in Sweden come with a financial risk
In Sweden, more than 60 percent of the housing stock consists of condominiums and property rights. The proportion of resident-owned cooperatives in the housing stock has increased over the past 20 years. During the same period, housing prices have soared. Housing prices have risen faster than household income, which has made it more difficult for first-time buyers to enter the owned housing market.
How might we define a service that delivers financial wellness?
This project’s persona is the first-time buyer, David, 30 years old, who has a steady income from his new job as Sales Manager in Stockholm. He has quickly adapted to the benefits of a consistent salary. He enjoys affording a little more even though he is cautious about money by nature. With a bit of extra money building up in his account, he’s now open to buying his first apartment. “Is there a better way to invest? Can a bank offer a worth that is meaningful when he is to choose an apartment that gives good value for money in the long term?” David isn’t quite sure yet what it all means, but he is up for the challenge. And so am I. Can we find a service to nudge David into financial literacy?
The challenge to find a service that suits the persona
The first step of experimentation can, of course, be done in different ways. I started with a kick-off board to develop a target group, thinking of markets and segments and considering the needs that can be met with 3 to 5 top features critical for a new product’s success. And then, of course, asking the question: Is the company’s management motivated to put this to market and convinced of future success? The answer is not always yes. Many brilliant products and inventions have never been put to market because of a lack of interest or business benefit.
Creating hypotheses is the key to quantitative and qualitative research
All this experimentation on the kick-off board is done for the most important reasons, to find the hypotheses. In this project, I formulated two hypotheses about people investing in condominiums and property rights :
We believe that users do not know how to assess the financial risk
We believe that users feel insecure about asking financial questions
Today, consumers are all faced with so many surveys. Every contact with a company is to be followed by a survey. All the survey tools make it seem so easy, and pretty graphs ”must be true”. But they can easily lie as people answer how they perceive themselves. As long as we have this in mind, we can work with the biases. This UX research piece was no different and will perhaps uncover why companies should add qualitative interviews to quantitative surveys.
The true version when people google all by themselves
It has been said that trending search words on Google show us the true version of people. However, as google proposes terms or sentences instantly when writing, we must not spend the money before we have it.
Curiously enough, I thought it could be interesting to see if Swedes think of the property purchase as an investment. For this, Google did not have enough data. But according to Google Trends, people in Stockholm, Gothenburg, and Malmö, the three biggest city areas in Sweden, are the only ones searching “to buy a share in a property” (köpa bostadsrätt). People answering the survey were all located in these three cities and interested in a follow-up interview.
Problem insight among the target group
When Swedes buy a share of the entire property, they also become responsible for the whole property’s debts, on top of the personal debts and obligations they have for the percentage they have bought. As it is complicated with financial statements with no feedback mechanisms, people tend to go with their gut feeling.
In the survey, two-thirds say that they always read the financial statements of the property. However, during the interview, the word “always” seems to mean that they have the intention and usually do it for the final object. The reason may be very human — they don’t enjoy it but know too well that they should.
In the survey, one open question was about what key indicators they considered. Two-third answered the question, and out of these, 50 % mentioned debt per square meter. It is correct but often tricky to find as the area of the property is not always stated. It would be more doable to compare the debts with the revenues, but no one thought of this.
Hypothesis 1: We believe that users do not know how to assess the financial risk
During the interview, we discussed financial risk by deep diving into a copy of a financial statement. It turned out to be a good move. In a gut feeling way, the interviewees considered everything to be essential. Everything they had said about the importance of debts before was gone. In short, they focused on the costs and especially on the maintenance costs.
Insight on hypothesis 1
When showing the income statement, the interviewees forget what they earlier had stated about critical key indicators that they usually are reviewing. Instead, they only focus on changes in sums or costs that they understand as if they are examining their private economy. In that way, they are on known territory and understand it despite no knowledge of financial reporting.
People avoid thinking in terms of risk, and they expect that tricky figures have a good explanation in the notes. The hypothesis should be pivoted as it is not so much about not knowing how to assess financial risk, but it is about the fact that users don’t want to think or be reminded of financial risk. That is a big difference and crucial later on to the principals and recommendations.
Users don’t want to think or be reminded of financial risk.
Interviewees thought more of financial wellness than financial risk.
Hypothesis 2: We believe that users feel insecure about asking financial questions
As no one really enjoys reading the financial statements, you would easily think that they would ask for a piece of advice. But it seems that this is rarely the case. None of the interviewees has thought of what kind of help they could get from a product or service.
I took the opportunity to ask how confident they feel when reading the financial statements. The less they knew, the more confident they felt and vice versa.
The respondents considered the real estate agency’s brochure among the essential documents to assess property investment but express short trust in the same real estate agents who are creating these brochures. Instead, the agent is only appreciated as a salesperson. Just a few believed that the bank had enough interest in evaluating the property’s financial statement.
Insight on hypothesis 2
The interviewees showed critical thinking when I presented a possible app. When we discussed an app that could guide, the most insecure people in financial matters were unsure if the guide could manage the task. Trust is crucial. People seem to prefer to live in uncertainty of the level of risk than taking a standpoint in the type of guidance they can get. They are more concerned about possible bad guidance than opening up for a new world of expertise. Trust in the digital world is more difficult than in the physical world as you do not get the same possibilities to reevaluate a relation.
However, not everyone was critical of the app. By framing the challenge as a How Might We question, you’ll set yourself up for an innovative solution. The discussions of a new service or product were difficult for most of the interviewees. They thought of reading the financial statements as painful but had never thought of a service that could help them gain insights.
People buying their first property are more likely to appreciate help from an app.
The number of respondents and interviewees is too small to decide if curiosity in an app depends on the personality or age. It seems as if younger people at the beginning of the career and buying their first property are more likely to appreciate such an app.
Middle-aged people perceive themselves as competent and are satisfied to continue as they have done without acquiring any new financial knowledge.
Principles
In a world where people globally worry about false information, a company that would launch the financial management app must prepare for building a reputation and address this trust gap.
The important thing for a company to launch this kind of app is to show credibility and the core reason why the company is doing it. And as people have a risk aversion, find positive statements about prosperity instead of risk assessment. Peter from Stockholm nailed it when he conveyed the message of financial success and well-being “Few other investments can beat a good property investment.”
Recommendations and next step
How might we design an app to nudge into identifying well-to-do property investments, to make users understand debt ratio, interest rate sensitivity, the principles in the financial statements, and provide an overview of identified opportunities?
Take the time to sit down with people that you later want to have as customers. You will find that people treasure to discuss and give their point of view. So start to formulate hypotheses, be less timid, and start conversations with people. You have everything to gain.
For this hypothetical project, I would like to give three pieces of advice:
- Focus on design principles for the app that are attractive to growth-minded people. It is not about age, but about people that are curious enough and that would listen to good advice.
- Create content that focuses on financial wellness and avoid everything that might remind the user of risk. Risk aversion is deep down in many of us except for those with risk-seeking behavior, but they might not be the target group for this type of app.
- Include technology to build trust in the results. With the increase of personal financial management tools, the interviewees quickly realized that they wanted more. With artificial intelligence, such an app will become ever more sophisticated.
Sophistication comes with artificial intelligence
