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Paper trumps online for better financial management - research

04 February 2015  |  5956 views  |  13 cheque

As banks increasingly move from an analogue to a digital world, a new study by London Economics indicates that consumers are better able to manage their finances when they receive paper statements sent by post rather than online.

The study, conducted on behalf of the Keep Me Posted campaign, compared the responses and attitudes of two groups of people in a test scenario - one group was sent information by post and another group received the same information online.

The study found that people were twice as likely to correctly identify how much money was in their account if they received the statement by post (82% vs 32% who receive statements online).

The results also showed that 75% of those who received a paper statement were able to correctly assess the financial health of their account compared to 48% who received an online statement.

In addition, those who received paper statements were also better able to spot ways in which to improve their finances, such as reducing spending (90% compared to 77%) or switching to an alternative account which offered a better deal (90% compared to 85%).

While many respondents said receiving information in an electronic format helped them manage their finances better, the result of the behavioural experiment found the opposite was true.

In recent years, service providers such as banks and utility companies have increasingly migrated customers to online only statements and in some cases have reduced the frequency of paper bills and statements.

Michelle Highman, chief executive, The Money Charity, says: "It’s really important to be in control of your day to day situation, and so, whilst digital products will give you quick and easy access to your accounts, combining this with more traditional paper statements might help you with a more thorough monthly review of your finances.”

Hannah Poulton, heead of multi-channel communications for Principality Building Society, which has adopted Keep Me Posted’s six-point pledge, says that the evidence that people seem able to make better financial decisions if they have access to paper statements is "compelling".

She says: "We hope that Principality’s commitment to retaining paper-based communications for those who prefer them will help our Members continue to manage their money better and keep their finances on a sound footing.”

Comments: (13)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 04 February, 2015, 18:20

From personal experience, I entirely agree with the findings of this study.

It's much easier to annotate a paper credit card statement with a highlighter than an eStatement for things like potentially wrong charges. 

I've blogged and commented to this contrary-to-conventional-wisdom effect on several occasions:

http://www.finextra.com/blogs/fullblog.aspx?blogid=6106

http://www.finextra.com/blogs/fullblog.aspx?blogid=6281

Am finally glad that empirical studies bear out this viewpoint - again, I notice, contrary to common wisdom: "While many respondents said receiving information in an electronic format helped them manage their finances better, the result of the behavioural experiment found the opposite was true."

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Russell Bell
Russell Bell - Fastbase Ltd - Wellington | 05 February, 2015, 04:38

For a business it's orders of magnitude cheaper to send a statement via email than via post and of course it's the customer who pays one way or another.  If you want a paper copy then print it.  Not difficult.  This "keep me posted" campaign is ludicrously luddite.

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 05 February, 2015, 07:21

This "don't give a damn about individual customer preferences" approach is ludicrously out of synch with current customer engagement best practices around segmentation, targeting, 1-to-1 marketing, etc. Besides, cutting costs is a stupid move when it can result in loss of much greater revenues, as it does in this case: As I'd highlighted in Save Costs But Lose Revenues With eBills And eStatements, "By turning off paper, billers ... save a few pennies ... but ... lose a lot of dollars..."

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Nick Collin
Nick Collin - Collin Consulting Ltd - London | 05 February, 2015, 11:49

Interesting!  As usual I'm with Ketharaman on this one.  I too continue to resist offers to switch to paperless statements.  For me, the monthly discipline of receiving, checking and filing a paper statement is something which online services have been unable to reproduce.  Passwords are a major problem.  And printing out statements is a big hassle for me.  On the other hand I'm a big fan of online banking and regularly check my financial details there too.  There's a lot of quite subtle behavioural, ergonomic and psychological things going on here which I suspect most banks don't understand and have never properly researched.  It's undeniable that the potential cost savings for banks are huge, but until they come up with much more imaginative approaches I fear those won't be realised.

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A Finextra member
A Finextra member | 05 February, 2015, 12:20

An interesting one. In remaining neutral I like to have paper ones too as, like many, I have different banks and multiple accounts so keeping easy to access printouts together (without going online) is preferable.

However, it is a bit dated and suspect the Gen Z 's and Mellenials just aren't as old-school dependant on paper in the same way and quite happy with real-time snapshots of their 'financial health/liquidity' using apps, online etc as part of their daily routine.

Very soon there will plenty financial personal assitance (mobile device) apps aggregating and linking banking info to serve up what anyone needs (real-time or historical). Paper statements will become a bit of a novelty and suspect any 'keep me posted' appeal was to a certain demograph or a specific business requirement...

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Simon Williams
Simon Williams - PA Consulting - London | 06 February, 2015, 13:50

Isn't this really just saying that the current generation of on-line statements and account information isn't good enough?

Digital statements should be more personalised, informative and accessible than paper ones, but in practice are currently just on-screen versions of the paper, and so intrinsically more limited. 

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 06 February, 2015, 15:37

I agree with @NickC about behavioural, ergonomic and psychological factors at play. That said, maybe banks and other service providers have finally "got" this, since I haven't been under pressure from anyone for at least one year to turn off paper. I've also started noticing TransPromos on paper bill real estates, so maybe these companies have finally stopped obsessing about costs and have shifted their focus to increasing ad revenues. 

I remember the excitement caused by Mint when it launched in 2009 or so. Everyone thought the new genre of Personalized PFMs would revolutionize the way people "work, live and play". The hype was so infectious that I bought the P2FM.com domain name. There was a spate of Mint-clones like WeSabe (USA), Kublax (UK), etc. Unfortunately, when all the hype died down, P2FMs found that not many people were willing to take the risk of violating the TOS of their banks and other service providers by handing over the account credentials of all their accounts to the P2FM. One after the other P2FM shut down, including the aforementioned ones. More in my comments below this post: http://finextra.com/blogs/fullblog.aspx?blogid=10059

All the practical problems that affected web-based P2FMs are affecting MObile Money Management Apps (“MoMMAs”). As of now, I haven’t seen MoMMAs do much more than warn their users that their $2.99 coffee will bust their budget. What’s the chance that Gen Y & Z will come out of WhatsApp / SnapChat / Instagram and hand over their account credentials to a MoMMA in return for advice that they must anyway be getting from their biological mothers? Gen Y and Z may be flightly but they’re not fools. 

We know how the web-based P2FM movie ended. The mobile money management app story won’t end very differently. Even if I'm proven wrong in future, we’re talking about the present and paper works best for money management.

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Russell Bell
Russell Bell - Fastbase Ltd - Wellington | 06 February, 2015, 22:00

Ideally a third-party developing a personal finance app would use a standard API/protocol that could obtain balance and transaction history for an account but didn't allow transactions, thus limiting liability.  If the customer did permit transactions safety features would kick in protecting both the customer and the third-party.  Such as value limits per transaction/per day, end-to-end identification of transactions, alerting the customer of transactions (eg. via text message) and dispute/reversal mechanisms.  This (imaginary) API would work the same for any bank anywhere in the world and the supporting policies and processes would be the same too.

But such an API/protocol doesn't exist and maybe never will.  For now a third-party who wants to add value by aggregating and linking info is stuck with such unpleasantness as screen-scraping bank websites and persuading customers to hand-over passwords thus unpredictable liability risks.

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Nitin Gupta
Nitin Gupta - Yodlee - NY | 12 February, 2015, 01:43

While it may be true that people pay more attention to things when they receive a paper statement vs. digital, the answer is not to rewind the clock and move back to paper!!!It is almost like saying that cell towers in my neighborhood don't work well so the world should move back to landlines!!!

The answer is creating better digital experiences where people get timely and personalized alerts on their smartphones and banking apps on how they are spending - we haven't seen that yet from banks. 

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 12 February, 2015, 12:18

Yeah right. My mobile doesn't work. To keep technology moving only in one direction, I shouldn't go back to landlines. So, should I stop talking and switch to email / text? I just read a blog post on how ineffective that is: It’s Sofa King More Effective to Pick up the Phone. IMO, technology must support business. Falling for the latest shiny thing just for the sake of using latest technology is the fastest way to going out of business.

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A Finextra member
A Finextra member | 12 February, 2015, 17:01

Picking up on your last sentance Ketharaman, you have a company that is built on exactly that and is now twice the capiltaisation of Google! Technology must support the consumer or customer.

Russell's right too in that having a single view of all your (distributed) bank/card accounts may be compromised or fairly limited if unable to perform transactions. However, I do believe there is a demand even for just having that 'snapshot' of financial position that allows or supports on the fly decision making - 'do I need to act on anything', 'what heppens if...' etc. Most banking app activity is not to perform transactions but merely to double-check financial health or get a statement update.

There is now for this year a UK government initiative calling for banks to create a common API's standard for open data sharing in aiming for the UK to be the centre of financial technology. Depite our doubts the future generations of bank customers will expect a more personalised and open banking society. How they bank (and want to be banked) will be different to the old fashioned trend of sticking to the same rigid bank for most our lives...

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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 12 February, 2015, 17:56

As long as a MoMMA or P2FM or any other third party service (TPS) is accessing a bank account, the customer has to hand over their credentials to them, regardless of whether the access happens via any (imaginary) API or screen scraping or whatever technology. Since there’s no incentive for any bank to trust that a TPS would use such access only for downloading account activity, the liability for potential fraud as a result of handing over the credentials to a TPS would always fall on the customer. And since a 360 degree of a customer's financial activity straddles multiple entities - bank(s), TELCO(s), Utility, etc. - a customer would be taking this fraud risk many times over. How likely are they to do it for getting frivolous money management tips?

The future belongs to apps that are purpose-built, seek access to just one or two accounts and provide significant advice in return e.g. BillGuard (card fraud alert), BillShrink (alternative plans from TELCOs and Utilities). (Post its acquisition by MasterCard, BillShrink no longer offers this service). These MoMMAs offering $2.99 coffee saving tips have no chance.

While the UK government's initiative API initiative is a step in the right direction, I wonder how much it would help in money management since, as I've mentioned above, a 360 degree view of a person's financial health straddles nonbanking entities that are (presumably) outside the purview of this new regulation.

The NetBanking and Mobile Banking apps of all my banks support transaction functionality. Despite that, if I mostly use them “not to perform transactions...", it’s because I merely want them to "doublecheck financial health or get a statement". Sometimes I wonder if we're exaggerating the need for external "help with finance": According to me, "Earn more and live within your means" is good enough money management advice!

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Michael Wright
Michael Wright - Striata | Secure Document Delivery - London | 13 February, 2015, 10:15

Whatever your personal preference about the form and format of customer communications, I take issue with the name of the campaign bankrolled by the paper and print industry and roping charities to claim legitimacy.

"Keep me posted" is a biased starting point for what is purported to be a customer centric, pro-choice campaign. 

I fully support giving customers a choice - but then campaign for that noble goal - not for a singular alternative that harks back to the dark ages.

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