Nudge-Onomics: A Noble Way To Give? Contactless And Donation Behaviour

Author:Mr Alan Eccles
Profession:Brodies LLP

Let's look at Nobel Prize-winning thinking and some recent trends in donations to charities.

Behavioural economist Richard Thaler won the 2017 Nobel Memorial Prize in Economic Sciences (aka the Nobel Prize in Economics). This was for work which "incorporat[ed] psychologically realistic assumptions into analyses of economic decision-making. By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes." In short, 'nudge theory'... apparently small influences that impact our decision-making: "a nudge, as we will use the term, is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not." (Thaler and Cass Sunstein)

Now to charities....

Making donations easy... and much more

One area where small influences have been having an impact and are likely to have future impact and also drive design is in donations to charities. The rise of contactless payments has proven an interesting 'nudge' factor that has positive and negative consequences.

Why negative? As an anecdotal example after Thaler's win, nudge theory was explained thus: when you are in a shop looking to buy lunch and the card machines (contactless or otherwise) fail, but there is handily a cash machine outside the shop, it is more than likely that the vast majority of would-be card-paying shoppers will rather put their shopping back than be inconvenienced and go to the cash machine. A small inconvenience can influence behaviour.

It appears this has been the case for charities recently. Brand new research by Consumer Intelligence has found that 37% who regularly donate money to charity collectors say they have cut back in the past year and on average they estimate they have donated £14 less and that 58% of adults say they are using less cash than a year ago. The Chief Executive of Consumer Intelligence said: "Contactless is convenient and secure so it is understandable that so many are happy to ditch cash... but there must be some concern that it is hurting charities with so many people admitting they have cut donations simply because they do not carry cash." In...

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