FT Adviser: Lessons From The World Of Gaming To Improve Financial Literacy
By Martin Gronemann and Iago Storgaard
Given the widespread obsession with video games, it’s no surprise that the financial services industry is looking to “gamification” as a new means of engaging with customers.
But why is it that, when video games can get their players to invest hours of time learning intricate game mechanics, financial institutions struggle to get users to spend mere minutes on a learning app to build knowledge about critical areas like pensions and life insurance?
By studying why people play video games, we have found that games rarely have the luxury to motivate users to learn their rules because it was important – only because it was rewarding in and of itself.
Despite a recent influx of disappointing and poorly executed ‘gamification’ elements in financial tools and services, we believe the learning models from video games offer three key lessons for building more effective digital tools for improving financial literacy.
Keep the pinch
When Super Mario Bros. launched on the Nintendo Entertainment System in 1985, it came with a 22-page instruction booklet.
Although this was well written and illustrated, it quickly became clear that players don’t learn how a game works by using an instruction manual.
Instead, players learn by ‘feeling the pinch’ during gameplay – experiencing the risk of miscalculating a jump over a speeding tortoise shelling and losing Mario’s life in the process.
Digital finance tools and games tend to present users with a more or less homogenous interface, with no regard for your actual level of financial skill or context.
Over the years game designers have adjusted their learning models, replacing abstract booklets and risk-free tutorials with in-game learning incorporating the consequences of faulty moves.
By contrast, most financial literacy tools work in completely fictional environments without any ‘pinch’.
Winning or losing doesn’t impact your finances, your pride nor your status, as the gamified elements are often disconnected from actual accounts and therefore removed from real life risks and rewards.
Enable a state of flow
As a consequence of video games’ diversified audience, their learning models need to adjust to skill level and context. By scaling difficulty and changing interfaces appropriate to a rookie or a veteran, games are able to keep players in a state psychologists refer to as ‘flow’.
If you have ever walked in on a teenager completely immersed in a game, you are familiar with flow.
Players lose track of the surrounding space and time in a state of total absorption, which also happens to be conducive to learning.
Digital finance tools and games, on the other hand, tend to present users with a more or less homogenous interface, with no regard for your actual level of financial skill or context.
A busy parent who quickly checks up on savings on a mobile, say, should get a different interface and engagement than the DIY investor who sits with a laptop on her couch.
As the gaming industry is changing, its continuous revenue model has pushed it to more carefully consider how to create prolonged user engagements.
The most successful video games today offer more than a one-off purchase, but keep players interested through steady releases of content, tips, community building, and competitions.
This offers plenty of inspiration for banks and pension providers built on the model of a once-a-year advisory meeting.
Games provide a platform to give customers advice on an ongoing basis, that could help build financial literacy: what are smart choices around taxes? How to plan for major life transitions, and what does it mean for my investments if interest rates are rising?
And this kind of engagement shouldn’t just be when something goes wrong and an intervention is needed.
Positive reinforcement, like providing a message to say, “Your investments are doing fine”, provides an opportunity to build a stronger relationship with a smarter and happier customer.
By providing ongoing conversations with customers, gamification could therefore help alleviate those aspects of financial planning that are most stressful and confusing: pensions, retirement accounts, mortgages, long-term investments.
These have, to a large extent, been overlooked by the bulk of digital innovation seen in the personal finance sector, which has most visibly focused on mobile apps designed to make payments and transfers easier.
In fact banks – once relied upon as a principle source of financial advice – have now receded to the role of a transactional service provider in most people’s minds.
A few lessons from the world of video gaming might just help fill the gap.