How digital banking can help our irrational brains make better decisions

The job of the human brain is not to analyze data or make complex decisions. Our mind’s main job is to make sure we survive the present and live to see another. He plays many tricks with the facts to get us to tomorrow.

Brain tricks and systematic deviations from rationality are called cognitive biases. Researchers have found that the human mind is subject to over 100 such biases. These served us well when mankind’s sole concern was to hunt, gather and procreate. In today’s world, however, our cognitive system can lead to errors, especially when making complex decisions like managing our finances.

Most digital banking apps aren’t designed around human cognitive biases
and appeal only to the logical side of the brain. Therefore, they tend to provide suboptimal user experiences and can lead to poor financial decisions.

Below are three examples of how banks can design digital banking apps to better align with cognitive biases.

1. Simplify

One of the greatest shortcomings of the human brain is its sheer laziness. A typical example is a cognitive bias called the “paradox of choice”. When it comes to choosing from a large number of options, people often find themselves paralyzed and unable to decide. Having too many options makes us doubtful and noticeably less satisfied with our decisions.

The digital bank can compensate for this cognitive bias by offering friendly experiences with limited options for customers. Another way to simplify the decision-making environment is to
harness the power of defaults. Our tendency to stick to default choices, aptly known as default bias, can be exploited in digital banking by preselecting the most appropriate options to encourage positive customer behavior, for example, do paperless statements a condition for opting out rather than .

Thus, banks could reduce the cognitive load of users and help eliminate the paradox of choice, increase customer satisfaction and improve decision-making.

2. AI-augmented decision-making

Cognitive biases can have a significant impact on how we make financial decisions, such as our tendency to prioritize immediate gratification over long-term goals. This so-called present bias leads to suboptimal financial decisions such as overspending and credit dependence.

Banks could use algorithms and AI to detect these cognitive biases and augment human decision-making pushing customers towards more desirable behavior.

Uber, for example, uses the psychological trick of awarding badges to entice drivers to work longer without forcing them. Another example is that Virgin Atlantic recommends that pilots use less fuel, thereby significantly reducing costs.

The digital bank could use AI-based recommendations to counter bias, for example, by encouraging and rewarding customers for setting up and contributing regularly to long-term goals such as retirement. Another way to counter the current bias is to alert customers with notifications and money-saving tips whenever they’re on an overspending path.

Such strategies help establish good habits and enable long-term financial well-being.

3. Cognitively intelligent digital banking

In digital banking, banks can leverage cognitive biases to influence customers toward more optimal choices. An example of this is the cognitive bias called “loss aversion”. Research shows that people experience about twice as much pain from losses as pleasure from an equivalent gain. Have you noticed that when shopping on Amazon, you tend to make faster buying decisions when there are only a few items left in stock and Amazon tells you to “order soon”? Amazon uses loss aversion to its advantage by implying that you will lose if you don’t act quickly.

In digital banking, loss aversion could be used to frame decisions to highlight the losses of not using a product or service instead of focusing on the benefits, such as highlighting the potential losses incurred in n not using the optimal savings or investment products. Thus, banks could incentivize customers to make more optimal choices.

Cognitive biases manifest in varying degrees, and some people may be more susceptible than others to certain biases. By analyzing past decision patterns, banks could use data analytics and AI to understand differences in customer susceptibilities to cognitive biases. This information can help optimize digital user experiences at the individual level.
In the future we may see cognitively intelligent digital banking apps using AI to automatically optimize digital experiences for individual cognitive bias profiles.


The human mind is fascinatingly complex but subject to irrational habits. To design truly exceptional digital experiences, banks will need to focus on human cognitive biases and behavioral science as much as functional superiority.

Such prioritization will create connections that will enable a more meaningful customer experience, improve decision-making, and strengthen financial health, resulting in more profitable and loyal customers.