This paper describes the findings of a series of field trials that explored how disclosure-type regulatory interventions could encourage consumers to switch to higher-paying savings accounts. Using data on over 130,000 UK savers we test information about better alternative accounts, a simpler way to switch, and digital reminders about a rate decrease.
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To inform possible future policy in the UK savings market, we test new consumer disclosure. Easy access savings accounts are the most popular and simplest way to save in the UK, with the main product feature being the interest rate. While significant rate differences exist on similar accounts both within and across providers, the majority of consumers rarely switch and so miss out on interest earnings.
The new disclosure proposals were designed to help consumers identify better products and stimulate competition between firms. We test their effectiveness using field trials involving five regulated firms and 130,000 consumers. Consumers in the trials were either about to experience a decrease in their interest rate, or were on a rate lower than available on currently offered products. We test three interventions: information about comparable higher-rate-paying products, a pre-filled return form that enabled simplified switching and a reminder about the rate decrease.
We find that front-page information about higher available rates led to an increase in switching from a baseline of 3% to 6% of consumers, while non-front-page disclosures had no effect. On a different sample of consumers, a pre-filled return form increased switching from a similar baseline of 3% to 12%. Reminders, especially those sent close to a rate decrease date, prompted an 8-9 percentage point increase in switching - comparable to the effects of the return form, albeit from a higher baseline level. All interventions increased switching within providers, but not to higher-paying products available from other firms. Despite switching within providers in the trials taking 15 minutes on average, according to a survey, and switching gains being non-trivial - £127 in the first year on average - we find that attention to disclosure is limited. This may explain the modest impact of most of the changes to disclosure trialled.
Paul Adams, Stefan Hunt, Christopher Palmer, Redis Zaliauskas
Paul Adams and Stefan Hunt work in the Behavioural Economics and Data Science Unit of the FCA, Christopher Palmer is an Assistant Professor at the Hass School of Business, University of California Berkeley, and Redis Zaliauskas is in the Chief Economist’s Department of the FCA.