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Nudge, nudge: Persuasion in financial services

Nudge theory, an idea from behavioural economics, uses prompts to encourage people to make better decisions. As it becomes more common in financial services, Nick Huber investigates whether it works

A person opening curtains to reveal lots of sales-related word bubbles including 'Best buy!', '% off' and 'New'.You’ve spent hours online looking for the perfect hotel for a mini break to celebrate your anniversary. You’ve compared reviews and prices and think you’ve found the one. A message on the website informs you only two rooms are available at the discounted price and six people are looking at the room right now. Does the message prompt you to pay for the room or make you think, “That’s a sales technique, I bet there are loads of rooms available”?

If you’re sceptical about such claims, you’re far from alone, according to Simon Shaw, market researcher and expert in ‘nudge theory’ – the idea that simple and subtle actions can encourage us to make better decisions. The name and theory were made famous by economists Cass Sunstein and Richard Thaler in their 2008 book, Nudge.