12 April 2022
With concerns about the cost of living superseding COVID-19 as the issue Kiwis are most concerned about, ASB's most recent financial wellbeing research has found close to 40% of New Zealanders already experience frequent payment problems; while nearly half of customers spent more than they earned in February 2022.
ASB Chief Executive Vittoria Shortt says while rising prices are undoubtedly putting pressure on household budgets nationwide, ASB has identified three ways customers can take back more control and, in many cases, put dollars back in their pockets.
The first is unarranged overdrafts. ASB's most recent quarterly financial wellbeing research found 10% of New Zealanders were overdrawn on their transaction account over the last six months, with 28% of this group going into unarranged overdraft four times or more.
"This got us thinking about how we could use behavioural science tools to proactively encourage customers to make small changes that can help save them money," says Ms Shortt.
Leveraging the behavioural science concept of nudge theory, where small prompts can empower people to make better decisions, ASB has helped customers proactively take control of their finances and avoid straying into unarranged overdraft.
As part of a trial the bank identified customers who had been overdrawn for at least two days of the previous month. These customers were emailed and received online messaging with tips on steps they could take to avoid unarranged overdrafts - and the associated fees and interest charges.
"What we found astounded us. We began these experiments in July last year and we've seen positive outcomes for 66% of customers contacted. Close to 18,000 customers avoided going into overdrafts in the month immediately after they received our communications, which suggests our nudges are helping them make decisions that improve their financial wellbeing."
Similar ASB customer trials have helped customers pay their credit card on time. Again, personal credit card customers regularly paying late fees received notifications offering tips on how to avoid them and manage card balances, achieving a 23% success rate.
"These nudges have shown that if we give customers timely information, we can help them make changes that boost their financial resilience. We're now applying these insights to support first home buyers who have one-year fixed rate mortgage terms rolling over this year."
First home buyers who bought in the past 18 months did so during record low interest rates. While ASB 'stress tests' all mortgage lending at a significantly higher interest rate than the applicable home loan rate, many of these customers have never experienced a rising interest rate environment.
"We can help customers understand the impact of rising rates and make them aware of options to confidently manage their money. With this in mind, we are reaching out to our first home buyers well before their fixed rate expires so they understand what future repayment amounts might look like."
Additional support is being developed for ASB mortgage customers with portions of their lending rolling over this year, including new home lending calculators and tools that will be available through ASB's website in May. Specific, personalised support is also available for any customer experiencing financial stress.
"Now more than ever, financial resilience matters. By helping customers make better money management choices, this will ultimately build a more financially resilient New Zealand," says Ms Shortt.