PARTNER
FSD Kenya
SECTOR
Inclusive Finance
PROJECT TYPE
Field and Lab Experiments
BEHAVIORAL THEME
Salience | simplicity | urgency| Timing
OVERVIEW
The Kenyan banking sector’s lack of competitive pressures had raised concerns, leading to an inquiry commissioned by the Competition Authority of Kenya (CAK) and Financial Sector Deepening – Kenya (FSD-K). The aim of this inquiry was to identify interventions that reduce searching or switching costs for consumers in order to enable them to find optimal banking products. Lab experiments were conducted to test potential policy responses, such as simplified cost displays and emphasizing potential earnings from shopping around.
The results showed that standardized and simplified cost displays increased participants’ willingness to search for banking products, and timing of disclosure also played a significant role. However, small nudges regarding potential cost savings did not lead to higher searching or switching behavior. The study suggests that interventions should focus on the point of sale and prioritize reducing search costs to create a more competitive marketplace.
Here, we highlight the importance of standardization, timing, and reducing search costs in promoting searching and switching behavior among consumers in the Kenyan banking sector. Effective interventions are likely to be implemented at the point of transaction, potentially through mandates or facilitating third-party cost-comparison functions.
