Using AI and Behavioral Finance to Cope with Limited Attention and Reduce Overdraft Fees

59 Pages Posted: 18 Jul 2019 Last revised: 27 Aug 2020

See all articles by Daniel Ben-David

Daniel Ben-David

Hebrew University of Jerusalem -Department of Finance

Ido Mintz

Intuit

Orly Sade

Hebrew University of Jerusalem - Department of Finance

Date Written: 2019

Abstract

In a randomized field experiment using a large personal financial management platform operating in the United States and Canada, we investigate mechanisms to reduce overdraft fees. A sample of users identified via an artificial intelligence (AI) algorithm as having a propensity to overdraw their accounts were sent reminder notices to test the efficacy of different framings in reducing the number of overdraft fees. Employing parametric identifications, as well as time-to-event semi-parametric analysis to learn that sending a reminder proved effective in and of itself, and the impact was significantly enhanced by simplifying the message. A negative framing of the simplified version elicited greater engagement and had a stronger impact than a positive framing. Significant effects are seen predominantly among users with medium to high annual incomes. We relate our findings to the literature on limited attention and the ostrich phenomenon. Our work also contributes to the literatures on financial technology, AI, and human-computer interaction.

Keywords: artificial intelligence, behavioral finance, overdraft, limited attention, ostrich

Suggested Citation

Ben-David, Daniel and Mintz, Ido and Sade, Orly, Using AI and Behavioral Finance to Cope with Limited Attention and Reduce Overdraft Fees (2019). Available at SSRN: https://ssrn.com/abstract=3422198 or http://dx.doi.org/10.2139/ssrn.3422198

Daniel Ben-David

Hebrew University of Jerusalem -Department of Finance ( email )

Israel

Ido Mintz

Intuit ( email )

7535 Torrey Santa Fe Road
San Diego, CA, CA 94043
United States

HOME PAGE: http://linkedin.com/in/idomintz

Orly Sade (Contact Author)

Hebrew University of Jerusalem - Department of Finance ( email )

Mount Scopus
Jerusalem, 91905
Israel
972 2 588 3227 (Phone)

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