Empowering Digital Banking UX Using the Laws of Psychology

In today's competitive financial landscape, exceptional user experience (UX) is not just a differentiator—it's a must. Financial apps and services can either simplify our financial lives or add to our stress. Understanding the psychology behind user behavior is crucial for designing products that are not only functional but also engaging and stress-free. This article explores the key psychological principles that can transform financial UX design from a source of frustration to one of satisfaction and loyalty.

The Importance of Psychology in Digital Banking UX

Banks and fintech companies constantly innovate to attract users. However, innovation alone isn't sufficient. Users, having experienced high-quality products, expect the same standard across all services, including banking. Thus, the core of an exceptional financial product lies in its user-centric design, informed by an understanding of human psychology. And having designed more than 150 financial apps in 37 countries over 9 years, my team can assure you that the fundamental laws of psychology work for people of any nation, age and income.

Here's how psychology helps improve financial products:

• Predicting Consumer Behavior. Psychological insights enable the prediction of user behavior, allowing financial institutions to design products that cater precisely to user needs and preferences, thereby enhancing satisfaction and retention.
• Enhancing Product and Marketing. Applying psychological principles can create more effective business, product and marketing strategies that resonate deeply with consumers, driving higher engagement.
• Improving Customer Service. By understanding how users think and feel, banks can develop customer service processes that effectively address user concerns, improving satisfaction and loyalty while reducing friction.

It is not easy for people to deal with finances, often conjuring up negative emotions. In fact, some people are even terrified to access their digital bank to view their balance. The finance environment causes stress and even sleeping disturbances for 65% of Americans, as stated in a 2017 study by CreditCards.com.

Moreover, another survey from PricewaterhouseCoopers (PwC) claims that the group of people who report the most stress about finances are millennials, since 42% of them have student loans, and 79% state that “their student loans are having a moderate or significant impact on their ability to meet their other financial goals.

Due to the fact that finances are such a stress-provoking issue for most people, it is important to know what can be done to improve this situation. What are the key financial pain points for people, and how can they be addressed with the right financial products? How can we change the relationship between humans and finance and turn it into something pleasant?

Ten Psychological Laws that Will Improve the UX of a Financial Product

A big step towards providing a positive financial experience entails not only offering cool product features and nicely-designed banking functions, but taking a deeper look into the ones who will be using the financial product as a part of their daily lives. The basis of this human-centered approach is the exploration and understanding of the human mind, psychology and mental habits.

We know that technologies develop rapidly, and new solutions are introduced to us daily, but what doesn't change is the way people perceive the world, think, behave, make decisions and feel. Although undoubtedly affected by the times, these fundamental principles have been developing within us since the beginnings of human existence, and they remain generally the same.

Knowing that, I want to go through some of the key studies, proven facts and user researches that were conducted specifically for the exploration of the psychology of the human mind and understand how these rules apply to financial UX design.

1. Jakob's Law for UI Consistency

According to Jakob Nielsen, users spend most of their time on other sites, so they prefer interfaces that work similarly to those they already know. This reduces the learning curve and increases the likelihood of user adoption. Ensuring UI consistency can significantly enhance usability in financial applications.

In essence, Jakob’s law correlates with studies exploring the learning curve and consistency: how we feel better if we face familiar paths, UI elements and scenarios, which reduces the learning curve of a new application.

For instance, imagine logging into your online bank account with the goal of quickly paying your monthly utility bill. We’ve all been there, and it's not the most pleasant task. What we want at that point is to just be done with it and get out quickly. In situations like this, people love when the design provides them with a stress-free experience: familiar, intuitive content and immediately identifiable features.

2. Leveraging Mental Models

Designing interfaces that align with users' mental models—how they expect a system to work—ensures that financial products are intuitive and user-friendly. This alignment minimizes cognitive load and prevents frustration, leading to higher user satisfaction.

A 2018 survey from D3Banking showed that 68% of digital banking users in America are frustrated with their banking experience. In reality, this is one of the main results of not thinking about the mental models and overall experiences of digital banking users.

The foundation for the concept of mental models was first described in the 1943 book, The Nature of Exploration by Kenneth Craik, a Scottish psychologist and one of the earliest practitioners of cognitive science. In his book, the author states that the human mind creates “small-scale models of reality” and uses them to predict similar events in the future.

When designing an intuitive digital financial experience, it is a great challenge for designers to create a match between the users’ perceptions and the banking UI design. As finances can be generally confusing for many people, it is important to understand the mental models of your target audience by conducting research about them.

3. Ensuring Explicit Responsiveness

Providing clear, immediate feedback is critical in financial services. Users need to understand what is happening at every step to feel in control. Explicit responsiveness reduces anxiety, builds trust, and enhances the overall user experience.

When referring to users of digital banking, receiving constant feedback is highly important. When there is money involved, people do tend to become very sensitive and emotionally triggered. The users have their time requirements, and they expect the system to synchronize well with them.

In fact, there has been much research done to better understand the connection between responsiveness, users’ satisfaction and ability to wait. Some of the most well known studies were conducted by Robert B. Miller in 1968, A.J. Thadhani in 1981 and Avi and Sara F. Rushinek in 1986, among others.

What all of these studies have in common is a confirmation that responsiveness is the most important factor, even more important than ease of use, in terms of user satisfaction. If banking interfaces cannot provide enough responsiveness for their highly-demanding users, they will feel frustrated and cause them to seek better alternatives that will fulfill their needs.

4. Optimizing Visual Processing

Information should be presented in a clear and visually appealing manner. Using visual elements and maintaining a clear hierarchy can help users quickly understand complex financial data, improving comprehension and satisfaction.

A research study conducted by 3M in 1997 concluded that visual images are processed 60,000 times faster than text. In fact, there is even a phenomenon called the "picture superiority effect" that demonstrates that images are more likely to be remembered than words. If we add icons to the text, it switches the irrational part of the user’s brain, which is responsible for emotions and feelings. An example of this is when you add emojis to a text to better visualize what you feel or think, when words cannot express it fully.

It is important to apply hierarchy when structuring the financial information so users will have a much easier time understanding the data about their financial situation. If the information has been correctly prioritized and spaced out by putting accents on the details, users will have a much more pleasant experience.

Another rule to follow when displaying information for digital banking users is the Miller's Magical Number 7 (plus or minus two), designed in 1956 by American psychologist, George Miller. It represents the maximum pieces of information: text, images, options and other elements that the human brain can directly distinguish. Therefore, users will have a clearer understanding of the financial information when it is divided into chunks, lists and bullet points.

5. Applying Gestalt Principles

Organizing UI elements according to Gestalt principles creates a sense of order and harmony, making interfaces more intuitive. This approach helps users process information more efficiently and enhances their overall experience with the financial product.

The users do love to see beautifully-made, simple and easily perceivable financial designs. A 2012 study by Google proved that people tend to decide if they think a website is visually pleasing within 1/50th - 1/20th of a second. Another fact coming from this research is that “the more visually complex a website was, the lower is its' visual appeal.”

Banking design language can be taken to the next level by using well-researched and proven principles of human psychology and perception. If people detect a lack of organization, simplicity and harmony within the banking product design, there’s a good chance they will also struggle when dealing with their finances.

Gestalt psychology, a movement initiated by a group of German psychologists back in the 1920s', looked for the understanding of how people's minds perceive whole shapes and objects rather than disconnected elements. The German word “Gestalt” means “shape” or “figure,” and the main points of Gestalt psychology are described as Gestalt principles.

If the banking interface is visually pleasing, harmonized and organized, it will create similar feelings in its user. Moreover, the financial success of your user highly correlates to the banking interface and the organizational system that it portrays. By using the right accents, symmetry, hierarchy and thinking into the composition of elements, the users will be able to focus on what is important and make better financial decisions, investments and savings for their future, thereby creating more wealth.

6. Managing the Paradox of Choice

Offering too many options can overwhelm users, leading to decision paralysis. Simplifying choices by providing fewer, but more relevant, options can reduce cognitive load and make the user experience more satisfying.

Users think they want all of the options and possibilities in the world, until they get them. When faced with too many choices, they will get stuck and can often end up becoming confused, frustrated and ready to leave. You might think that by giving users endless options to choose from will help, but, in reality it increases the cognitive load or “excessive thinking.”

The theory of Hick's Law, proven by behavioural studies in 2000 and even confirmed by FMRI studies of brain research in 2015, describes this phenomenon in a simple way: the more choices users are given, the longer it will take them to make a decision. This might seem like an obvious and logical statement, but quite often it is forgotten. Hick’s Law also correlates with the Paradox of Choice by Barry Schwartz, who states: More choice leads to more stress and reduced levels of customer satisfaction.

It is not an easy task to create the perfect balance of simplicity and minimization without damaging the functionality. Banking UX/UI designers should spend a lot of time getting to know the behavioural patterns of their users - how do users think, make decisions and if these decisions have rational or emotional backgrounds.

7. Encouraging Safe Exploration

A well-designed interface that reduces the fear of making mistakes encourages users to explore more features. This not only enhances user engagement but also allows users to fully utilize the product's capabilities.

Often, people are afraid to make mistakes, and the word “error” itself sparks a fear in people’s minds. Moreover, in activities in which there is financial involvement, people are especially frightened, because sometimes a single mistake can cost us precious time, a change in mood and, of course, money. We don't want to make the wrong decisions, choose a disadvantageous offer, press the wrong button and experience bad consequences. 

The “Yerkes-Dodson Law,” originally developed in 1908, states that “Too much stress degrades performance” and can often lead to users experiencing errors.

A well-designed banking platform is created in such a way that it is hard to make mistakes. As the saying goes, “The best error message is no error message.” It can be achieved if the информатион architecture is constructed in a way in which it leads users to only successful outcomes, avoiding the possibility of making mistakes. However, if a mistake does happen, having a clear message about it and an easy way to recover or undo the action will make the user feel in control, which is something designers of banking platforms should strive to do.

8. Designing for User Goals

Financial products should be designed with a clear understanding of user goals. Whether it's sending money, saving for a goal, or investing, the interface should facilitate these actions seamlessly, providing a sense of accomplishment and satisfaction.

In many situations in life, when people have a goal set in their minds, they will filter their perception and only focus on that goal, disregarding the rest of their surrounding environment. A great example to illustrate this idea is called the “cocktail party effect”, originally described by the British scientist, Colin Cherry, in the early 1950s. This effect describes the human brain's ability to focus its attention on the voice of a single speaker while filtering out the rest of the chatter that surrounds it, as often occurs at large parties─hence, the cocktail party effect. However, we can also become easily distracted from a conversation. For example, when we hear someone mention our name, we often lose the focus of our current discussion.

When designing a digital financial solution, it is vital to understand the main user goals and what they will be focusing on the most, how to address these goals and not distract the users from them. Try imagining how your users will feel if they are experiencing distractions, lose track of the task they are trying to accomplish and not reach their goal as quickly and easily as they expect? Such dissatisfaction will lead to unpleasant user emotions, and they might feel like other tasks on this platform will be similarly hard to manage.

When we learn the users’ goals, we can also analyse the areas of the banking product that should be accented to grab the users’ attention, and which, on the contrary, should be toned down, in order to not cause a distraction from the users’ goal. If a financial interface is designed in a way that it helps its users to reach their goals successfully, the users will be pleased and appreciate the positive experience and effort that had been made when designing the banking product.

9. Motivating Positive Financial Behaviors

Incorporating elements of gamification and motivational psychology can encourage users to engage in beneficial financial behaviors. Features that reward users for good financial practices can foster a deeper connection with the product.

A useful concept of human psychology for looking at what creates a certain human behaviour is B.J. Fogg’s behavior model, introduced in 2009 by behaviour scientist and author, B.J. Fogg. The main idea behind it is that, for a specific behaviour to occur, three elements have to be present at the same time: motivation, ability and triggers.

The model assumes that a behaviour is most likely to happen when a person feels sufficiently motivated and is able to perform the behaviour. This principle can also be applied to banking, when designing a banking interface that motivates, triggers and provides the ability for its users to achieve their financial goals.

People are always looking for advantages and will be more motivated to use a banking product if it provides a benefit for them. They will use your product if they trust it, if it looks and feels appealing and if the product improves their experience in some way. Rather than focusing on “Here's what our product can do,” think about "Here's what people can do with our product, here's what people can accomplish and gain with using our product, here's how people can achieve the things they want with our product.”

As stated by Samuel Hulick, a UX designer and author of the site “useronboard.com”: People don’t buy products; they buy better versions of themselves. Just like we use a calendar to improve our time management and a map to be better at navigating, people use banks to improve their financial management. 

10. Building Trust Through Design

Trust is paramount in financial services. A secure, reliable, and aesthetically pleasing interface builds trust and loyalty. Transparent communication and user-friendly design can significantly enhance the trustworthiness of a financial product.

Why do people feel sensitive when it comes to trusting someone? We can look for answers back in the prehistoric times, when our ancestors interacted within groups of tribe members. The trust in the groups was critical and helped them to survive. It was vital to know if the members of your group were plotting against you or if their intentions were sincere. As stated in the research of human brain studies by cognitive anthropologist, P. Boyer, and and Professor of Psychology, A. Norenzayan, our brain is a powerful mechanism, seeks hidden, complex causes.

Other studies on evolutionary psychology and cognitive biases, coming from physician and evolutionary biologist, R. Nesse, and Ph.D. Professor, Martie G. Haselton, confirm that the human mind works almost like smoke detector, alarming us whenever we feel any possible threats in our surrounding environment.

In the world of banking, we often hear encouraging words about having peace of mind, feeling secure and trusting our banks. But, what exactly makes us trust one particular financial service? Is it a conservative, official look? Information clarity? A 2001 study on users’ trust in cyberspace by expert in software development, Dr. P. Nikander, and expert in human-computer interaction, K. Karvonen, found:

Quality of design to be highly among the features which enhance the feeling of trust in users when doing transactions online.

It is actually quite surprising that such a rational matter as people giving their trust to a certain service highly relates to something so emotional as aesthetics and beauty of design. When a person visits a brand new banking or Fintech platform, their first impressions are critical, as the determination of whether the website can be trusted or not literally happens at first glance.

A study coming from B.J. Fogg in 2001 was conducted on “Web credibility.” In this research, 2,440 people participated in viewing professionally-designed websites and gave great insights on people's perception of evaluating trustworthiness. The results of the study concluded that professionally-made design elements and features are more important than its contents.

Conclusion

Creating a successful financial UX design requires a deep understanding of user psychology. By focusing on the user's needs, behaviors, and emotions, financial institutions can design products that are not only functional but also enjoyable and stress-free. This user-centric approach not only enhances user satisfaction but also fosters long-term loyalty, ultimately contributing to the success of the financial product.

In order to create a customer-centred design in finance that will be enjoyed and appreciated by its users, it is all about understanding and empathy. Financial product designers need to understand the ways users perceive the world. The users expect their banking solution to know and understand them, care about them and reward them. Through integration of these psychological principles into financial UX design, we can transform the way users interact with financial products, making the experience both pleasant and effective.

Check out my blog about financial and banking UX design >>