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Think Forward Initiative 2018

How and why do people make financial choices?

What kind of mortgage is right for you? What are the potential pitfalls of a student loan? When should you start planning your pension? Making financial decisions is not easy, however unavoidable. So how do people make financial decisions and why?

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Deloitte and the Think Forward Initiative

The Think Forward Initiative (TFI) is a multi-year movement that brings together a range of experts and researchers to examine how and why we make financial choices. Deloitte is a knowledge and innovation partner to the Think Forward Initiative (TFI). Rapidly developing technologies enable us to radically improve and disrupt the future of financial services for consumers.

At Deloitte, we believe that organizations around the world have the ability to harness the potential of these technologies and innovate, playing a significant role in shaping and influencing the role companies are fulfilling in the future. With the initiative we move from research to solutions. Understanding why people make certain financial decisions, such as saving, investment and retirement and borrowing, spending and budgeting but also financial literacy. With these insights from research, more personal, instant and relevant solutions can be designed to adhere to consumer needs and to drive sustainable progress in society at large.

Follow this page to keep up with the Think Forward Blog series. In the next months more articles and the rest of the Blog Series will be posted.

#1 How an accelerator and research challenges are bringing more impact to decision-making

Imagine you were about to buy something big. You’re excited—maybe even a bit too excited. What if you had an app that used things like your financial data and social media posts to act as the voice of reason? An app to help convert the emotional aspects of the purchase into logic, all to help answer one big question.

Should you or shouldn’t you?

This app is one of the Think Forward Initiative (TFI) projects that entered into the TFI accelerator this month. The term “accelerator” is usually used more by techies than economists. But that’s part of the whole idea. In case you don’t remember, TFI works like this. Economists and behavioural scientists do research about how people make financial choices, then their insights are used to develop actual tools to help people. The goal is a financially savvy society where people make informed choices about their money.

Think Forward Initiative takes it up a notch

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#2 Improving borrowing behavior through social media analysis

Have you ever borrowed money to buy something and later regretted the decision? Maybe even wondered if you had temporarily lost your mind? If so, you’re not alone, at least judging by recent data on credit card debt, loan defaults, and home foreclosures. In research conducted for the TFI and U.S. National Science Foundation, data scientists Rich Colbaugh and Kristin Glass have developed methods to help people anticipate and avoid poor borrowing decisions by leveraging social media and machine learning. 

Studies of borrowing have tended to assume individuals act rationally and therefore have emphasized im-proved access to information and increased financial literacy as ways to help borrowers make better deci-sions. More recent research incorporates “non-rational” drivers of behavior, such as emotions and peer effects, into borrowing models. These models provide a more complete and accurate view of borrowing behavior and offer valuable insights, but also have significant limitations:

  • The models are descriptive, rather than predictive/prescriptive;
  • They require data on individual-level outcomes, the collection of which is typically labor-intensive (e.g. using surveys) and gives rise to privacy concerns;
  • Model estimation relies on standard econometric techniques, which may not be adequate in light of the nonlinear relationships and large-scale, high-dimensional, noisy datasets involved.
Improving Borrowing Behavior Through Social Media Analysis

More about the Think Forward Initiative?

For more information about the Think Forward Initiative please contact Peter van Loon or Joep Arends via the contact details below or follow Think Forward Initiative on Twitter @ThinkForward or LinkedIn @Think Forward Initiative.

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