Australia's Ubank is aiming to turn its free-spending customers into diligent savers through AI-powered money management technology and tips on "re-wiring" their financial brains.
Australians are spending $31 billion in savings annually, as short-term thinking, poor planning and impulse spending habits threaten long-term financial security.
According to research from Ubank, two million Australians have less than $1000 in savings, 61% do not have a dedicated savings plan and 46% do not even have a weekly budget. More than half dip into their savings regularly and one in three spend all of their money by pay day.
In an effort to understand the mindset behind spending and saving, Ubank called in Dr Phil Harris, an Honorary Fellow at the University of Melbourne’s Faculty of Business and Economics, to carry out an experiment with 50 human guinea pigs aged between 22 and 50.
The participants responded to a series of financial decision-making tasks while Electroencephalography (EEG) technology read brain wave activity via electrode sensors were placed on the scalp.
First, the tech tested responses to common financial scenarios, recording how the brain reacts to receiving and spending money. The next phase of the experiment saw participants confronted with an image of their ‘future selves’ - a digitally manipulated photograph aged by 10 to 20 years - and then they were asked to complete another round of financial decisions as brain activity responses were again captured.
Says Harris: "Humans are wired to want rewarding outcomes immediately, so it was very interesting to conduct this experiment. The results found that the people were significantly more likely to choose to save money when they became more in touch with their future self.
"After interacting with visualisations of themselves later in life, 72% of participants shifted their mindset towards wanting to save versus spend money.
"The experiment also found that when we measured brain activity after the participants had met their future selves, there was a 150% increase in attention paid to the moment of choice between saving cash versus spending it. This shows that when we are in touch with our future selves, we invest more mental effort into creating a positive financial future rather than wanting to have immediate rewards."
Ubank says that by the end of the year it plans to roll out technology to make it easier for customers to save. AI will be used to help plan for ‘regular’ expenses such as monthly phone bills and also ‘irregular’ costs like car insurance, that need to be paid less frequently.
With money set aside for these kinds of expenses, customers can then manage their daily spending allowance and savings plan more effectively, similar to the way fitness apps support wellbeing.
Meanwhile, the bank is also offering money tips, encouraging people to visualise their future selves and their savings goals, to make money decisions when in a positive mood, and to use cash rather than electronic money to ensure spending sinks in.