Behavioural economics and financial services marketing: a review

Abstract

PurposeIt has been argued that the insights provided by behavioural economics have profound implications for the study and practice of marketing. The purpose of this paper is to provide a detailed analysis of how such insights help enhance understanding of aspects of marketing and consumer behaviour in financial services markets.Design/methodology/approachThis paper looks at various facets of behavioural economics which it is felt provide particularly important and salient insights in the context of financial services. In particular, it studies loss aversion and prospect theory, status quo bias and defaults, framing and anchoring effects, hyperbolic discounting, availability effect and salience and over‐confidence. In doing so, it provides a number of examples from the financial services context which provide insightful and informative insights for both commercial practitioners and policymakers. In each case, relevant phenomena are introduced and explained before providing a number of applications and examples from the financial services domain.FindingsThe authors find that the insights afforded by behavioural economics are useful in helping to explain various aspects of consumer behaviour in financial services markets. It is shown that an understanding of the implications of behavioural economics may help in fashioning a choice architecture that is more likely to bring the desired consumer response, from either a commercial or policymaking perspective.Practical implicationsThis analysis provides important insights for those responsible for the marketing of financial services, policymakers in the financial services domain, third sector agencies seeking to foster greater engagement with financial services and other interested parties.Originality/valueThe paper adds value by drawing together various aspects of behavioural economics, providing an analysis of their relevance to financial services marketing and offering numerous examples and applications.