The Default Effect | Behavioural Science in Banking


When it comes to decision making, people are sometimes lazy. Decision fatigue is a very real phenomenon and the psychological cost to constantly having to make decisions all day, every day can take a toll on the best of us. To that end, being presented with a default option removes the cognitive load and requirement for us to make an active choice in the moment.

This is known as the default effect. Automatically assigned defaults are a very effective way to encourage people to a prescribed course of action. Studies have continually observed that default options are extremely compelling as a nudging tool. As consumers, our tendency to assume that the default option presented to us is the best choice also causes us to be happier sticking to the status quo. Being twice as sensitive to loss as we are to an equivalent gain, it is unlikely that we would deviate from a prescribed default on the off chance that our deviation might result in incurring a loss.

How can defaults be applied to digital banking services?

Using social proof as a tool to encourage product buy-in

The human tendency to rely upon and make decisions based on the status quo is a fact that cannot be overlooked. Social pressure has the ability to impact our decision-making processes in real time. The rates of participation in organ donation programs globally have been known to be impacted by the defaults in place (opt in vs opt out). Consumers choices developing into social defaults has also been shown to be affected by observing the behaviour of others. Social pressure can have real time impacts on people’s behaviours, such as organ donors being in the presence of others when making their decision.

In digital banking apps with features like the configuration of spending budgets or the creation of saving goals, popular default options (like personalised pre-set amounts for budgets or relevant suggestions for goals) coupled with information like reviews of satisfied customers or statistics of how many people have benefited from the features can encourage users who are uncertain to make up their mind and instil choice confidence for both new and returning customers.

Defaults can be aspirational

From achieving a monthly savings goal to carbon offsetting with each purchase, defaults can be aspirational in nature for users to guide them to better decision making, financial or otherwise. Defaults that feel more natural are less likely to be acted against by consumers, and when applied correctly, can greatly influence our choices and conversion levels. For instance, when a customer gets paid every month, presenting them with a preconfigured ability to instantly transfer an amount to their savings account will increase the likelihood of them saving money regularly.

It should also be considered that more significant defaults require more effort from consumers to assess the emotional and cognitive costs of choosing that default. For example, consumers are less likely to adopt a default of saving $400 a month, compared to saving $100 a week.


Banks and fintech firms use nudging techniques to influence change, create positive reinforcements and encourage better decision making. With the likelihood of consumers staying with the default options presented to them, good financial decisioning can be engineered to an extent by effective messaging and content in digital banking apps to help users achieve their financial goals.

Setting the right defaults in a situation where decision making is challenging can nudge users towards a course of action beneficial for them in the long term. Defaults are a worthy tool to consider by financial institutions when deploying financial wellbeing programmes and enhancing their digital banking services.

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