• by Ray Schultz , Columnist, May 9, 2019

Don’t bother having your copywriters write up long, descriptions of your product. Your prospects will probably ignore them, judging by "Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence From Savings Accounts," a paper done for the National Bureau of Economic Research.

The team found full product disclosures have minimal impact, even when backed up by email and SMS reminders.

The researchers conducted tests with 124,000 savings account holders at five United Kingdom depositories.

“We looked at whether disclosures of product attributes -- and how those attributes stack up against competitors’ products -- do any good,” states Professor Christopher Palmer of the MIT Sloan School of Management, one of the authors.

The proposition was simple: After a disclosure of how their current interest rate stacked up against those of competitors, account holders were told they could earn an average of $185 more per year in interest by switching to another bank. But few jumped at the chance. 

“Our study revealed that no matter what you tell people in fine print, consumers have been conditioned to ignore it,” Palmer continues. ”This is an uphill battle for regulators who are trying to support consumers with the information they need to make good choices,” says Palmer.

The tests included disclosures in different formats and channels, such as email.

According to the paper, the average disclosure increased switching behavior by only 0.7 percentage points, from 8.7% in the control group to only 9.5% in the treatment group.

In addition, the just-sign-here return switching form increased switching to 12% from a baseline of 3%, and timely emails and text messages increased switching by 4-5 percentage points.

Email marketers used to dealing with fractions of percentage points might be satisfied with a 9% — or 4% or 5% lift in switching.

Still, the overall disregard of the disclosures should give pause to firms trying to craft privacy notices under GDPR. Is there any sign people will be swayed by them — or even read them?

The email reminder in one of the tests was slightly more successful than the text-message reminder at inducing any and internal switching (5.3 versus 4.2 percentage points, respectively, in column 5).

This difference might attributed to the additional personalized content of the email, or the ease of switching on a computer versus a cell phone, the study posits. However, “the difference between the two coefficients is small and not statistically significant,” the paper notes.

Emails received 0-2 weeks before the rate decrease in the digital reminder trial did the best. But text-message reminders had the smallest impact received on the day of the decrease in the SMS-only trial.

Readable front-page information on better available products raised the switching rate from 3% to 6%. Disclosures not on the front page of a mailing had no effect.

“Our results show that savings accounts are in a sense sticky due to limited consumer attention to informational disclosures,” Palmer says. “We found that overly pessimistic beliefs about both the benefits of shopping around and the inconvenience of the switching process are key reasons for the price-insensitivity of individual savers.”

What can companies do to improve things?

 “First, firms can try to make things more readable and user-friendly because on the margin it makes a difference.,” Palmer says.

“It’s not a silver bullet, but disclosures can be better designed. Instead of fine print on the back of an annual statement, companies can send notices separately and invest in deliberate design to highlight what is most important.”

Second, policymakers and companies should send some information separately.

“Different stakeholders will each want to include their pet disclosure, so there needs to be a holistic review of what would actually be useful to consumers,” Palmer adds. “Too much information dilutes the potency of the message and it will be ignored.”

Finally, disclosure designers should seek to build consumer trust.

 “If the disclosure seems good for the consumer at the expense of the firm (as in our setting), people may question whether there’s some sort of catch,” Palmer concludes. “If disclosure comes from a third party like a government agency, it may be deemed more trustworthy.”

The other researchers include Paul D. Adams Stefan Hunt and Redis Zaliauskas