Mind Over Money
By Angela Sanders Friday, October 18, 2013, 02:23 AM EDT
BNZ weighs in on the role emotions play in financial decision making with EmotionScan
When it comes to money, most of us would like to believe that we are the rational and pragmatic masters of our finances. After all, who really wants to accept the notion that the state of our bank balance is directly related to the state of our minds?
Yes, we are emotional creatures in an emotional world, but when it comes to the rigorous discipline of managing our bank accounts, of comparing mortgage rates or drawing up a solution to get out of debt, surely it is the realm of cold, hard logic that must win out over the wishy-washy and unpredictable sea of fickle human emotion? The Bank of New Zealand’s latest technological brainchild would have us believe that this is quite simply not the case.
Get in touch with your financial feelings?
Consider the question of whether or not to take out a mortgage on a new home. It’s a question that continues to weigh heavily on the minds of many Kiwi home buyers currently in the process of comparing home loan rates. With the market now defined by high LVR lending limits, mortgage rates snaking their way ever higher, record asking prices and interest rate rises looming just around the corner, the last thing one would consider being advised to do by a major bank would be to get in touch with your feelings about money.
Introducing Emotion Scan
EmoticonScan is an online facial recognition tool that its creators – The BNZ, psychologist Dr Stuart Carr and Swiss emotion software firm nViso- claim is able to read a person’s facial expressions as they listen to a series of specially targeted financial scenarios in order to indicate in which areas they are both most and least capable of handling their money.
The science behind this ‘open to all’ online venture, whose ‘making of’ video has already garnered over 50,000 you-tube hits, involves combining cutting edge 3D facial imaging technology with artificial intelligence algorithms in order track and analyze the viewer’s emotions in real time, and so afford a glimpse into how people really feel around key money issues such as cash flow, budgeting, mortgages, retirement, financial security, financial control, debt, dependents, donations and savings.
The logic here being that the more you know about how you feel around money, the more empowered you will be to take charge of your finances. Thinking drives feeling, which in turn dictates behavior. For instance, if you find that you’re constantly in debt, it’s because you have a very certain way of thinking and feeling about being in debt that is driving you to take the repeated action that continues to hold you there. The key to paying off debt is quite simple - draw up a budget, set a savings target and cut back on wasteful spending. All of this implies behaving in a certain way, namely practicing self-restraint with regards to your spending habits and remaining focused upon your goal – to be debt free.
Is it credible?
Whilst there is no denying that our emotions play an integral role in affecting our financial decision making, not a few skeptical eyebrows are being raised at just how credible EmotionScan is in its ability to determine our feelings around key money issues. Some users who have taken two scans (one after the other) have reported conflicting and contradictory readings. In fact one New Zealand Herald journalist went so far as to quip ‘It may use state-of-the-art software, but looking at my results, it seems no different to arcade machines that scan two faces to predict how their babies would look’ in summation to his review of the technology.
The debate rages on
Whilst the reliability of this new technology remains in question, the role emotions play in making big financial decisions, such as choosing between mortgage rates when buying a new home, still remains the focus of much debate amongst economists. The pragmatists argue that evaluating mortgage rates in NZ, where the housing market resembles a gold rush for sellers, remains a logical and balanced decision making process into which emotion factors very little. The behaviorists however, are quick to point out that a visit to a housing auction in Auckland will soon reveal just how highly-charged emotions can run and how powerful a factor they are in affecting life changing financial decisions.