Nudges in financial services are a subtle intervention to steer users towards better financial decisions and outcomes, without restricting their freedom of choice.
At Moneyhub, we’ve spent a significant amount of time deep-diving into the mechanics of behavioural change, particularly through the lens of Consumer Duty. After developing extensive messaging frameworks for both savings and overdraft customers, one thing has become clear: the nudge is one of the most powerful tools a financial institution has to help prevent foreseeable harm and drive positive outcomes.
Key Takeaways on nudges in finance:
- Nudges are subtle interventions (usually in-app notifications) to help users take actions that will improve their financial wellbeing
- Nudges work through audience segmentation, event triggers, and nudge chaining to build sustained behavioural habits
- The effectiveness of nudges are determined by their timeliness and relevance
- Follow the Moneyhub nudge framework to replicate our clients results and gain high nudge open and action rates
What is a nudge in finance?
A nudge is a steer in the right direction. We all know them: reminders about payment deadlines, hints to move money into interest-gaining accounts and even lending pre-approvals. But how do some financial institutions create more effective nudges than others?
As part of choice architecture, nudges are typically embedded in apps across banking, lending and pensions apps. They encourage a user to take an action that would benefit their financial wellbeing without restricting the user’s ability to say no. While nudges are typically delivered by in-app notifications in financial services, they can sometimes reach customers by SMS or email.
By changing how information is presented or when it’s delivered, institutions can overcome ‘status quo bias’, which is the tendency to do nothing, even when the action is in the customer’s best interest.
For example, many of our colleagues have reported failing to move their money into savings accounts when it can gain interest, simply because their other life priorities get in the way. It’s in these types of situations that nudges and wider behavioural economics can be most effective.
How do nudges work?
Nudge interactions in digital banking, lending, pension and wealth apps occur based on a rigorous four-step logic:
1. Audience segmentation
Define groups of customers based on their demographics, behavioural data and financial aspirations.
2. Trigger
Determine when the user should receive a nudge, based on an action or event.
3. Nudge
Send a targeted message via the right channel.
4. Chain
One nudge is rarely enough for a behaviour to become a long-term habit. We ‘chain’ interactions together to build sustained action.
How to create an effective nudge?
It might surprise you to know that the content of a nudge isn’t the deciding factor on whether it works. The two most important factors are:
- Timeliness: ensuring the nudge is sent in the optimal window for conversion
- Relevance: ensuring the nudge relates to financial decisions that genuinely matter to the customer
Timeliness of a nudge
The impact is dictated by the window of opportunity – the brief moment when a customer’s attention and intent are perfectly aligned.
Real-time > batch-processed triggers:
Relying on a data intelligence layer, you can identify specific events and send the nudge while the customer is still ‘in session’, rather than when the financial context has passed. Significantly lower the barrier to action by nudging when the user is actively thinking about their finances.
Relevance of a nudge
In terms of relevance, the effectiveness of nudge interventions are directly tied to the quality of the underlying data:
Hyper-personalised > static nudges:
Rely on real-time transaction enrichment, savings goals and individual user information instead of generic rules-based alerts like ‘your balance is low‘. Identify specific patterns, such as a customer who consistently dips into their overdraft, and offer suggestions for a tailored solution when the user is most likely to act.
What is the Moneyhub nudge framework?
When we move from static, batch alerts to real-time, hyper-personalised nudges, the engagement metrics shift dramatically. In a recent trial with a major UK high street bank, we implemented a ‘Savings Awakener’ journey. This targeted customers with idle funds in zero-interest accounts – a key risk area for foreseeable harm under Consumer Duty.
The results speak for themselves:
- 75% open rate: compared to the low single digits seen in traditional email marketing, our in-app nudges achieved a significant increase in open rate.
- 44% conversion to action: nearly half of the users who opened the nudge took a positive financial step within 48 hours, such as moving funds into a higher-interest product.
- 23% increase in ISA completion: in similar journeys with partners like Nationwide, we saw a 23% uplift in customers completing their ISA journeys.
With that in mind, we’re sharing the exact framework that the team at Moneyhub uses with clients to construct highly effective nudges that lead to the smart money actions:
1. Journey-audience match
Leverage the data you already hold on your customers to meet the criteria for timeliness and relevance. Map out customer journeys based on historical segment behaviour to know what the possible (and realistic) next steps are.
2. Time your trigger
Once you’ve mapped the journeys, you need to trigger nudges based on user activity. Use your intelligence layer to identify when the customer is most likely to take action.
3. Lead with the why
Go beyond the financial setting and look at what the money represents. Use your messaging to remind the customer of their financial goals and indicate what progress could mean to them.
Examples of nudge theory in action
Here are some examples of the potential situations, sample nudge copy and intended actions that occur from nudges in financial settings:
| Journey | Nudge copy | Potential action |
| Subscription finder | “We’ve noticed your monthly gym membership has ended, leaving you with an extra £35 this month. Would you like to redirect this ‘found’ cash into your ‘Home Deposit’ pot to keep your momentum going?” | By identifying money that the customer hasn’t yet accounted for, you can help them reach their savings goals faster and increase savings deposits. |
| Debt prevention | “You’re paying a high interest rate on your external card. Based on your spending, switching to our 18.9% APR card could save you roughly £20 a month in interest.” | Cross-sell your credit card and meet Consumer Duty requirements by proactively intervening to prevent foreseeable harm from excessive debt maintenance costs. |
| Pre-affordability checks | “You’re just two months away from your deposit goal! Would you like to see if you’re pre-approved for a mortgage so you’re ready to make an offer the moment you hit your target?” | Maximise conversions by opening the selling window exactly when the customer is moving from a saving phase to a buying phase. |
| Wealth efficiency | “You have a high balance in your current account. Moving some of this into your ISA before April 5th could help protect your future gains from tax.” | Drive wealth maximisation by helping customers move from stagnant cash to productive assets. |
Want to put more nudges in action?
Theory is a start, but the real power of nudging for banks lies in the results of better financial decisions. Whether you are looking to meet your Consumer Duty requirements or simply want to drive higher engagement across your product suite, the right data foundation is non-negotiable.
Explore our Categorisation and Enrichment Engine to see how we turn raw data into the next best action for your customers. And if you’re ready to improve your own choice architecture, get in touch.
FAQs
Effective financial nudges should be timely, easy to act upon, and ethically transparent to ensure they benefit the consumer’s long-term health. These rules often focus on simplifying complex choices, such as auto-enrolling employees into pension schemes while maintaining their right to opt out.
A nudge strategy is a behavioral science approach that subtly alters the environment to influence people’s decisions without forbidding any options or significantly changing economic incentives. In finance, this strategy is used to guide customers toward better habits, like increasing savings or paying off high-interest debt, by leveraging cognitive biases.
The six types of nudges are: attention, perception, memory, effort, intrinsic motivation and extrinsic motivation. Framing nudges around one of these distinctive cognitive mechanisms has shown to influence behaviour.
About the author:
Shannon Trimble is a fintech and regtech content marketing manager based in Manchester, UK. She owns content strategy at Moneyhub and alongside that, interviews our internal subject matter experts, turning their quotes into crystal clear insights. She particularly enjoys transforming traditionally complex or ‘boring’ subjects into engaging content that is genuinely valuable to the reader. Outside of her work, Shannon enjoys escaping the UK winter by chasing the sun.
share