At first glance internet dating might not appear to have much relevance to personal finance.

However the same technology that is used to match potential mates is now being used to categorise individuals’ financial behaviour and to help them better control their finances.

Galen Buckwalter wrote the algorithm behind giant US dating site and is applying the same technology to finance.

“No two people approach such detailed cognitive tasks as finances in a similar way,” says Buckwalter, the Chief Science Officer at Payoff, a US loans company which uses personality types to help borrowers manage their repayments.
It’s just one example of the burgeoning field of neuroscience and finance, which explores how people make financial decisions.
“What we found really interesting is that psychology has never really focused on the financial implications of personality.”

It’s just one example of the burgeoning field of neuroscience and finance, which explores how people make financial decisions.

It ranges from examining personality types to exploring the actual workings of the brain, such as the work being done by Elise Payzan-LeNestour at the University of NSW. Payzan-LeNestour’s recent work has examined how the brain can become conditioned by financial market volatility and how this could help explain why rogue traders take such big risks.

Users of Payoff do a short quiz, which then categorises them into one of 10 financial personality types. For instance, there is The Guardian, who is conventional, patient and down to earth, or The Adventurer, who is curious, imaginative and accepting.

Financial regulations forbid Payoff from using the psychological data it collects to assess credit applications. Instead, borrowers’ psychological profiles are used to help them manage their repayments and finances.
“That data we use is to help people understand themselves, understand where they are psychologically, what are their habits, and then help them understand kind of this nurture of what to do to get out of debt,” says David Herman, Vice President of Data Science at Payoff and a neuroscientist.

For instance, the data is used by the company’s staff to tailor the language they use for each customer and to select examples that are most likely to resonate.

Payoff also provides a behavioural therapy program – a series of emails that provides breathing and relaxing techniques – to try to reduce the effects of financial stress on its clients.

Only scratching the surface

The company often helps distressed borrowers consolidate loans and offers them a lower interest rate. It has made over US$100 million in loans and had only 10 defaults.

Buckwalter, a former Professor of Research as the University of Southern California, says he envisages a wider use of financial personality types in future. “We very much want to take that, turn that debt into savings, into investments. We think this information gives us a real advantage in being able to offer up the types of products that are going to make the most sense to different personalities,” he says.

Frida Polli, the CEO and founder of pymetrics, which does psychological profiles of jobseekers and then matches them to potential careers, says the use of neuroscience in business and finance is just beginning.
Pymetrics has young jobseekers play some online games, with their responses used to assess their cognitive and behavioural traits.

“We specifically go into things like attention, memory, planning on the cognitive side. On the personality side, it’s things like how risk-taking are you, how altruistic are you, how well do you read emotions,” Polli says.
Pymetrics then compares the results against profiles of successful people in 40 different careers to see what is the best match.

“We’ve aggregated data from 40 different career paths (people in those paths) and looked at their data and said, ‘Okay, what are the traits that define those people who are successful in those careers’?” Polli says. “We essentially give you an understanding of how well you map with the people that have been successful in those careers.”

From there, the company will match jobseekers with companies which have roles the jobseeker is suited to.

“I definitely think we’re only scratching the surface. Neuroscience is a field that essentially is only a few decades old. I think that we’re still making very important discoveries from a sort of basic science perspective,” Polli says.
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