Simpler Choices: How We Drove 5x More Reinvestment in Brazilian Treasury Bonds
In Brazil, treasury bonds offer consumers a way to protect their savings from risk and high inflation. However, around 80% of investors miss out on continued earnings by not reinvesting when their bonds reach maturity.
Irrational Labs partnered with the National Treasury of Brazil and B3, the main stock exchange in Brazil. They asked us to help their investors avoid a lapse in earnings. We tested behaviorally-informed messages to investors, focused on encouraging re-investment for bonds that were reaching maturity.
The experiment drove five times more scheduled reinvestments relative to control. Our results show how teams can boost retention by offering simple choices and making it easier for users to take action. These findings lay the groundwork for making bond investing even more seamless and accessible for everyday Brazilians.
The Opportunity
Increase Reinvestment in Treasury Bonds
In Brazil, treasury bonds offer the best return consumers can get for a very low-risk investment- even safer than a savings account!
Historically, many Brazilians have stored money in savings accounts called poupança, but money in these accounts will lose value over time when inflation outpaces the interest rate. Treasury bonds are a better alternative for those looking to protect their money from the ups and downs of the stock market while still earning returns that keep up with inflation.
Brazilian citizens can use a government-run website called Tesouro Direto that offers a user-friendly interface to buy bonds and monitor their portfolio. Brazil’s National Treasury and B3 have taken on several initiatives to make bond investing more accessible to everyday Brazilians, including easy account creation, one-day withdrawals to increase liquidity, and bonds designed for specific goals like retirement or education.
Unlike most other investment options, bonds have a maturity date, after which the money is automatically returned to the investor. To keep earning, people need to reinvest in a new bond. For example, if you buy a 1-year bond now, you have to choose a new investment next year.
The Tesouro Direto website offers a way to choose a reinvestment option before a bond matures, so that the investment continues to grow without any extra effort. However, B3’s data shows that only about 20% of money invested in Brazilian bonds gets reinvested when the bond matures. This means that most of the time, the money is returned to users, and often ends up in low interest accounts.
The Challenge
Tough Choices
Behavioral science tells us that people often struggle to remember tasks or make decisions when they need to take action. Investors may intend to reinvest, but forget or procrastinate.
Furthermore, if investors do nothing, the money goes back to their account. Investors must actively take a number of steps to reinvest, and the path of least resistance is no action. Once the money is returned and is easily accessible, it is even harder to resist the temptation to spend rather than reinvest.
The second challenge is that choosing a new bond is hard. When a bond expires, people can’t reinvest in the exact same one. And with over 30 bond options available from the Brazilian National Treasury at any given time, the sheer number of choices can be overwhelming. This can cause people to drop off.
The Solution
Make Choice Easier
To encourage more bond reinvestments, we developed new emails reminding investors that their bonds would mature soon. These messages focused on getting users to “pre-commit” to reinvesting before the funds were returned to their account. Research on tax refunds has shown that when people decide in advance what to do with their money (pre-commitment), they’re more likely to stick to their financial goals.
To reinvest, investors have to make two big choices:
- Should I reinvest my money in bonds?
- If yes, which bond should I choose?
Which of these choices would cause more cognitive friction and drop-off? Which was more important to address in the email?
To answer these questions, we designed two behaviorally informed messages aimed at resolving choice friction. Each one focused on a different key decision, with the goal of facilitating choice and driving action.
Email 1: Forced Choice – Should I do it or not?
The first email focused on the decision of whether to invest or not. It gave users two options: 1) Reinvest and keep earning OR 2) Stop investing and stop earning.
We call this a Forced Choice treatment because it makes the consequence of not clicking “Reinvest” more explicit. This forces users to consider what they stand to lose if they don’t reinvest. We also incorporated loss aversion into the language to highlight what users will be giving up if they don’t reinvest (i.e. the chance to keep earning).
Email 2: Active Choice – Which one should I choose?
The second email focused on the decision of which bond to choose next. We call this an Active Choice where we present users with several options, while creating the implicit default that they had already decided to reinvest. This shifts focus from the decision of “do I want to invest?” to “what bond should I choose?”
We layered on several behavioral science techniques to make this choice easier:
- Reduced choice: We offered three options that were similar to the bond a user held before, with a link to peruse all options if desired
- Decision aids about length of time: This helps users distinguish the options and find the one that matches their financial goals.
- Social proof: An indicator of the most popular choice if users wanted further guidance to only one choice
Email 3: Attention Only – Heads up: your bond is expiring!
We also tested a neutral message that aimed to communicate the upcoming bond maturity but did not present an easy choice.
Investors were randomized to receive one of the messages or a control of no message. All investors (including those in the control group) also received automated emails from the investment portal 30 days and 5 days prior to the maturity date.
The Impact
5x More Scheduled Investments
The core outcome we measured was the proportion of users who scheduled their reinvestment prior to the bond maturity date. Note that no changes were made to the actual flow to make a reinvestment—the experiment only added two new email notifications.
Several interesting results emerge:
- Forced choice treatment drove the most scheduled investments: The Forced Choice treatment led to 5x more scheduled investments compared to the control group. The Active Choice treatment led to about 4.3x more scheduled investments compared to Control. The difference between these two treatments was statistically significant.
- Grabbing attention makes a difference: The Attention Only message resulted in about half as many reinvestments as the two choice friction messages. This suggests that about half of the impact we see in the winning treatment is due to the added salience of bond expiration from the two new email messages. The remaining effect we can attribute to making investment choices easier for people.
- Forced choice treatment had the highest open and click-through rates: Investors who received the Forced Choice email were 4 percentage points more likely to open the email and 9 percentage points more likely to click through to the investment website compared to the Active Choice group (statistically significant).
- Active choice treatment had the highest conversion rate on the website: Investors who received the Active Choice email were 5 percentage points more likely to complete the reinvestment process once they had reached the website relative to the Forced Choice group (statistically significant).
- Persistent friction to reinvest: While the new emails increased attention for reinvestment, there was significant drop-off throughout the process. Despite a 28% click-through rate, only 2.5% of users in the Forced Choice group successfully scheduled a reinvestment.
Lessons Learned
Simplifying Choices for Better Results
The results show that drawing attention to the bonds’ expiration and presenting a forced choice of invest or stop investing was most effective at spurring action and getting users to go to the website. However, once there, the challenge of selecting a specific bond, which required more cognitive effort, may have caused some investors to drop off, driving down the conversion rate.
In turn, the active choice treatment asked people to make a slightly harder choice within the email: which bond did they want to choose? This complexity may have lowered the initial click rate, however the investment in making that choice easier pays off later when users have to select a bond. The conversion rate was highest from the active choice, perhaps because users arrived at the website already prepared to choose their bond.
Three overall lessons emerge for future email designs:
- Make choices easy: When sending emails, reduce the cognitive effort required to make a decision. The easier the choice, the more likely users are to act.
- Reduce decision fatigue: When people face tough choices, such as choosing from 30 different bonds, they may abandon the process. Providing decision aids and reducing choice can help guide them through the process.
- Stay on their radar: Regular, well-timed reminders are crucial. Keeping the opportunity in front of users with multiple touchpoints can help them follow through on their intentions.
Next Steps
Further Reducing Friction To Reinvest
The emails successfully tackled the issues of low attention and complex decision-making. However, there is still significant friction to reinvest in bonds. Users must recall their login credentials, navigate through the reinvestment section, identify the expiring bond, select a new bond, choose an investment amount, etc.
Due to all this friction, many users dropped off the process. Unfortunately, this is not a problem that emails alone can address. The next step for B3 and the National Treasury is to improve the user experience to minimize all friction, such as allowing one-click reinvestments directly from the email or using more popular and accessible communication methods like WhatsApp. With behavioral design, we’re hoping these changes can help even more Brazilians grow their savings through Treasury bonds.
Special thanks to Paulo Moreira Marques of the National Treasury of Brazil and Felipe Paiva, Christianne Bariquelli, and the whole team at B3 for their partnership on this project.
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