CBA’s digital ‘nudges’ could see $4m uptick in yearly credit card repayments

Commonwealth Bank App Digital Nudge

In the month after receiving their annual tax refunds, Commonwealth Bank of Australia (CBA) customers that received in-app prompts repaid on average $541 on their credit card debt, research from the big four bank has revealed.

The bank’s findings stem from a recent trial using digital nudges, a new feature driven by CBA’s artificial intelligence-powered Customer Engagement Engine (CEE), offering “well-timed, targeted” notifications to select customers to encourage better spending decisions.

Customers eligible for the trial (out of a million-strong cohort) included those who consistently incurred at least three months of interest repayments on their credit cards, the bank said.

Immediately upon receiving their tax refunds in their CBA accounts, these customers were prompted to consider how they could accelerate their financial goals using these funds.

The messaging within CBA’s prompts focused mainly on the benefits of reducing debt (including savings on interest or avoiding late fees) as well as encouraging customers to make credit card repayments.

As a result, the bank’s behavioural economics team noted an evident “shift in customer behaviour”, recording more credit card repayments made by customers who engaged with in-app nudges.

Using a behavioural science methodology, CBA’s chief data and analytics officer Andrew McMullan explained that customers view ‘windfall gains’ such as annual tax refunds differently compared to regular income.

“We tend to mentally put these funds into a ‘free money’ category which means we’re more likely to spend these funds without considering opportunity costs,” McMullan said.

A statement by CBA revealed that the very idea to launch digital nudges was in fact born out of research conducted by CBA’s behavioural economics unit, exploring the importance of “well-timed” information on trade-offs when making financial decisions.

Referring to results from the trial, McMullan affirmed the need for proactive customer communication to encourage goal-directed behaviour, stressing that tax refunds are typically no small amount – the average refund is approximately $2,400, CBA’s FY20 research revealed.

“The trial showed that if the credit card nudge was rolled out to all eligible customers, this would result in more than $4 million in ‘catch-up’ credit card repayments each year,” McMullan said.

McMullan singled out the CEE’s growing capability, which leverages 157 billion data points daily, which enabled the bank to tailor messaging for these digital nudges.

To date, the Engine (first unveiled in 2018) remains the cornerstone of CBA’s customer service personalisation objectives, covering all communication within the CommBank app, as well as “in-branch or over the phone” conversations.

CBA chief executive Matt Comyn has been vocal about the bank’s continued investment in its CEE, which as of January this year was running 400 machine-learning models (a two-fold increase since 2019) and making over 35 million decisions per day.

Notably, the bank is also using its CEE-embedded technologies to fast-track disaster responses, detect abusive behaviour as well as to enhance its popular Benefits finder platform, which netted customers nearly half a billion dollars in savings over 2020.

Just last month, the Federal Government singled out the CommBank app (and Benefits finder in particular) as strikingly “innovative”, having serviced customers well throughout the Covid-19 crisis.