Application of Nudging to Increase Banks’ Customers’ Vulnerability Disclosures in Line with the Financial Conduct Authority’s Consumer Duty Regulation

Abstract

Problem:
UK financial regulation increasingly favours sustainability-driven consumer protection, with the Financial Conduct Authority (FCA) Consumer Duty (in place as of July 2023) obliging firms to monitor customer vulnerability, ensure fair outcomes, and uphold strict data safeguards. Resulting vulnerability disclosures, guided by the FCA, must avoid inducement, misuse, or preferential treatment by the regulated institutions. Initial research at the host bank indicated that, despite implementation flexibility, under-disclosure persists: financial resilience, though the most common vulnerability, is least declared. Preliminary industry analysis attributed this to omission and optimism biases, suggesting that Behavioural Science interventions could enhance the rate of disclosures, and thereby necessitating in-depth academic research.

Objective:
Accordingly, the initial aim of this two-stage study was to uncover the barriers and enablers to vulnerability disclosures by bank customers – the former included shame and trust biases, whereas the latter included improved contact and access to information. The literature review conducted in parallel aimed to narrow down the possible behavioural interventions – it resulted in the selection of social norms and defaults as the most appropriate nudges. Simultaneous regulatory research established the boundaries of interventions, thereby informing the resulting nudge design.
The ultimate objective was to evaluate three principal hypotheses in the second stage of this study:
1. Norm-based opt-in nudges that appeal to shame and trust biases may increase acceptance of the vulnerability disclosure clause among bank customers.
2. Positive emotions towards the bank may be a by-product of the intervention, and
3. Increased trust in the bank may be a by-product of the intervention.

Method:
The literature review identified the Capability, Opportunity, Motivation, and Behaviour (COM-B) model as the most suitable diagnostic method, and defaults and social norms as the most appropriate interventions. Consequently, an initial questionnaire study, grounded in the COM-B framework and conducted independently at Bangor University via SONA and on the Attest platform with its paid respondents, identified shame and low institutional trust as key barriers to disclosure. At the same time, debt and inadequate savings emerged as common concerns across the surveyed groups. Comparative platform analysis highlighted stronger links between vulnerability and disclosure reluctance among the diverse participants sourced via Attest. Building on this, a positivist digital experiment via the UserZoom platform tested nudges addressing shame and trust, combining defaults and social norms, within simulated mobile banking journeys. Controlled conditions enabled systematic tracking of disclosure uptake among paid respondents sourced via UserZoom, aligning with existing research on digital default framing, also identified in the literature review.

Results:
In the initial questionnaire study, we found evidence that customers unlikely to disclose their vulnerability were more likely to either not trust banks or any institutions, or be ashamed, in turn pointing to trust and shame biases that nudging could potentially overcome. In terms of how customers prefer to be nudged, we uncovered a desire for better, more personal contact or for easily accessible information about disclosing online. Regarding the primary concerns shared by both the financially vulnerable and those unwilling to disclose to banks, debt and insufficient savings were found to be the most prominent, and hence informed the content of the nudges.
The subsequent intervention study, for which we created two parallel nudge versions - Academic-style language and Bank copywrite - found that nudges targeting shame and trust biases had no statistically significant effect on willingness to opt in for bank contact regarding vulnerability, with regression and ANOVA analyses showing negligible explanatory power. While exploratory findings indicated that Academic-style nudges elicited more favourable responses than Bank-style versions, this may reflect differences in tone and the inclusion of opt-out reminders rather than substantive behavioural influence. Limitations include reliance on opt-in defaults, weak credibility of social norm cues, and the brevity of mobile-compatible nudges, which may have constrained their persuasive potential.

Conclusion:
Our research highlighted the limited yet nuanced effects of opt-in defaults and normative cues on financial vulnerability disclosures. It suggested constraints linked to brevity, institutional tone, and weak normative credibility. Given the ethical and psychological sensitivities involved, future research should investigate how disclosure nudges interact with Dual Process cognition, trust and shame biases, with Academic-style messaging showing potential advantages over 'bankspeak' – a possible wider behavioural market failure - resulting from the Consumer Duty regulation. Further, more targeted studies with banks or regulators could yield richer insights, advancing the Behavioural Economics (BEco) literature and informing evidence-based policymaking.

Date of Award	20 Jan 2026
Original language	English
Awarding Institution	Bangor University
Supervisor	John Parkinson (Supervisor) & Paul Rauwolf (Supervisor)