The Last Word Comment


Gamification: loyalty in everyone’s best interests


How can gamification of products be redesigned to really help customers?


Julie Haugen Chief product and marketing officer, Oakam Julie.Haugen@oakam.com


For decades, consumers have shared in the upside of their brand loyalty, earning air miles, credit-card points, and other perks for their repeat business. And, with the global loyalty-management market set to reach $4.59bn by 2021, most would agree that the application of this early form of gamification to retention and engagement strategies has been good for bottom lines. But for customers, the choices they have


been rewarded for making have often left them financially worse off. In today’s era of conscious capitalism though, gamification is being redesigned to better align the interests of customer and business. Consumer finance is one industry that


stands to be transformed by this new approach to gamification, while, at the same time, opening doors to greater financial inclusion. In the UK alone, more than 1.7 million


people are without a bank account and 40% of the working-age population has less than £100 in savings, according to the Select Committee on Financial Exclusion. The reason that so many consumers remain


financially excluded is because traditional institutions find their risk profiles too high or hard to measure. This represents a loss of potential income for some lenders, a challenging underwriting environment for others, and an expensive solution that often leaves borrowers in a debt trap. The Centre for the Study of Financial Innovation estimates that the poverty premium paid by financially excluded individuals is £1,300 per year. Gamification offers a way to solve these problems. Firstly, it helps lenders to make up for a less


robust upfront risk assessment when dealing with borrowers with little or no credit history.


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This represents a loss of potential income for some lenders, a challenging underwriting environment for others, and an expensive solution that often leaves borrowers in a debt trap


reward programmes is that the latter incentivises more spending, rather than on- time repayment. These borrowers then face a second hit in the form of interest charges on the higher balances they have been encouraged to accumulate. This makes it clear that it is about profit first, consumer well-being second. In the first three weeks of launching


Oakam Grow – our own app-based gamification feature – in April, the prospect of earning points resulted in a marked 16% improvement in on-time repayment among our borrowers. From the borrower’s perspective, beyond


the prospect of rewards like the ability to skip an occasional payment, cash-back, and better terms on future loans, it also represents an opportunity to build credit history and graduate into credit products with lower rates. This is already being successfully applied


in health insurance, where individuals can lower their premiums by sharing data, from wearable fitness devices, that helps insurers more accurately evaluate their risk. Why is now the opportune time for


Whilst character screening and evaluation


of available data is still critical, gamification allows lenders to reduce the upfront risk they are taking on over time, by offering borrowers positive financial incentives for good repayment behaviour. The difference between this approach and, for example, the structure of credit-card


www.CCRMagazine.co.uk


consumer lenders to embrace gamification? The rapid pace of smartphone penetration in lower-income communities and the growing sophistication of AI and data analytics. In the UK alone, smartphone penetration increased from 52% of the population in 2012 to 81% in 2016. This paradigm shift will enable lenders to


reach more consumers and more effectively apply behavioural science and data analytics to developing more efficient operating models and richer customer relationships with more potential for growth. CCR


July 2017


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