The Treasury is advising the government on its responses to the ACCC’s Retail Deposits Inquiry and Home Loan Price Inquiry. Despite the financial benefits that can result from switching products, the reports found a lack of consumer engagement in these markets. For both markets the ACCC recommended that prompts be considered encouraging consumers to see if they could benefit from switching to alternative products that might better suit their needs.
BETA is working with the Treasury to: (1) identify the relevant behavioural factors in consumer financial decision-making; (2) understand the utility of prompts; (3) determine the optimal design for the prompts proposed in the ACCC reports; and (4) understand the barriers and enablers consumers experience when switching or repricing to identify additional interventions which may complement, or be an alternative to, the use of prompts.
BETA is conducting a suite of research activities to support this work, including a field trial (‘trial’) in partnership with a large retail bank. This trial will specifically test a single prompt designed to encourage disengaged customers to engage with their bank to negotiate a better deal on their home loan. This will provide evidence informing the effectiveness of prompts to encourage engagement in a relatively disengaged cohort.
Trial aims
The aim of the trial is to test the effectiveness of a prompt to encourage disengaged customers to call the bank to see if they are eligible to receive a lower interest rate on their loan.
ADDITIONAL TRIAL INFORMATION
Intervention start and end date
Start date for Timepoint 1 (T1): Tuesday, 03 December 2024 (12 am) with the prompt displayed for 7 days until Tuesday, 10 December 2024 (12 am).
End date T1: 7 days after the close of the prompt in the mobile application (17 December 2024).
Timepoint 2 (T2) will be 3 months post T1.
Timepoint 3 (T3) will be 3 months post T2.
End date of the intervention: Friday, 29 August 2025 for final report.
Ethics approval
Macquarie University Ethics Subcommittee, Project ID: 18484, approval date: 18/11/2024.
Experimental design including randomisation
This is a 2-arm trial. The study uses a cluster randomised controlled trial (RCT) design. Clusters are defined as unique groups of individuals and their shared loans (e.g., a person with a loan or two people sharing one loan).
Clusters are randomly assigned to either the treatment group or control group with approximately equal number in each arm. The randomisation is performed at the cluster level to ensure that all members of a cluster receive the same treatment condition.
After initial randomisation, stakeholders will remove 10% of individuals from the treatment group as part of their automated system.
The primary analysis will be conducted at the cluster and individual level; i.e., whether at least one individual in a cluster takes action in response to the intervention (cluster level) and how many participants within a cluster engage with the intervention prompt (individual level).
Outcomes will be measured at three time points. Timepoint 1 (T1) will be 7 days after the close of the prompt on 10 December 2024 in the mobile application (17 December 2024). Timepoint 2 (T2) will be 3 months post T1. Timepoint 3 (T3) will be 3 months post T2. T3 outcomes will explore longer-term effects of the intervention on financial wellbeing of participants. T2 outcomes will be exploratory.
Intervention(s)
This project will be a 2-arm cluster randomised controlled field trial. Clusters will be defined in the administrative data as people who share loans, defined through inter-related person-loan pairs. This is because the intervention will be delivered to individuals, and the outcomes will relate to both people (e.g. calling the bank) and loans (e.g. rate reductions).
Participants in the trial will see a prompt surfaced in their banking app if they are in the intervention arms. We will use bank administrative data to measure the primary and secondary outcomes.
Control condition
Control participants will not see the prompt.
Outcome(s)
Primary outcome variable: The study’s primary outcome is customer contact with the bank. Measured at both the cluster and individual level. The cluster-level analysis will examine whether any customer within each cluster contacted the bank. The cluster-level analysis is consistent with a model of joint decision-making by people within each group. This model assumes perfect coordination. Under this model all members of a group collaborate on decisions and therefore action taken by one member represents a coordinated action.
The individual-level analysis represents an upper bound of the treatment effect. Here each individual is treated as an independent actor and assumes that there is coordination among individuals in the cluster, but that it is imperfect. That is, we will use cluster-robust standard errors to account for correlations between individuals within each cluster while measuring each person’s separate action.
Secondary outcome measures include Interest rate, re-pricing, financial stress, financial wellbeing.
Interest rate: A variable at the cluster level, the interest rate outcome will be a continuous variable representing the mean interest rate of all loans in a cluster expressed as a percentage. This will be averaged within treatment groups to give the mean interest rate by arm. This outcome will be measured at T1.
Repricing: A binary variable at the cluster level of whether at least one loan in a cluster was repriced during the intervention period. This will be constructed from administrative data, with 1 indicating at least one loan was re-priced and 0 if it was not. For shared loans, the outcome captures whether the shared loan was re-priced regardless of which borrower initiated the change. This will be averaged within treatment and control groups to give the proportion of clusters with reduced rates by arm. This outcome will be measured at T1.
Financial stress: A binary indicator at the cluster level of whether at least one person in a cluster has experienced financial stress (0 = no financial stress, 1 = financial stress). This will be any of:
- Hardship support requests, OR
- Late payment fees for any of their loans, OR
- Arrears on any of their loans
This will be averaged within treatment groups to give the proportion of clusters in financial stress by arm. This outcome will be measured at T2 and T3.
Financial wellbeing: At the cluster level we will measure the total balance of available accounts such as deposit accounts, investment accounts, and shares held by each individual in the cluster at T2 and T3. The construction of this variable will depend on account information that is shared by the bank partner. This will be averaged within treatment groups to give the mean balance in each arm.
Expected sample size
The planned number of clusters for this trial is 11,922 (defined as unique groups of individuals and their shared loans). 18,769 person-loan pairs, representing the total number of unique observations in the dataset. Adjustment by stakeholders: Stakeholders will randomly select 10% customers of individuals initially assigned to the treatment group and remove them from the study entirely as part of an automated process in their system.
Initial random assignment before adjustment by stakeholders:
- Treatment group: 9,400 person-loan pairs
- Control group: 9,369 person-loan pairs
Final number of clusters in each condition before adjustment by stakeholders:
- Treatment group: 5,961 clusters
- Control group: 5,961 clusters
Other
Registered on the American Economic Association Social Science Registry: AEARCTR-0015045