On July 4, our CEO, Tiphaine Saltini, was invited to an interview on behavioral finance with the FinMag team.
By Marie-Ange Nodar
How did you come up with the idea for Neuroprofiler?
Initially attracted by management, I studied at a business school, and at the same time, in response to my attraction to cognitive science, I obtained a Master’s degree in cognitive science. My thesis in behavioral finance is to some extent the convergence of these two, and I wanted it to have an application in the business world.
After this behavioral finance thesis, and while I was working in private banking and econseil, I was commissioned to work on compliance issues, in particular MiFIDII. In this way, I found a concrete use case that could really help banks in the short term to improve their processes through behavioral finance.
Could you introduce us to the Neuroprofiler concept?
The Neuroprofiler concept is to use both gamification and cognitive science in three areas:
- Investor profiling
- Financial product recommendation
- Financial education for individuals
What is behavioral finance?
The aim of behavioral finance is to take all the research in psychology, and apply it to finance. For example, to anticipate investor behavior, to model it, or even to predict it.
There are several techniques for measuring investor behavior. Broadly speaking, there are two types of technique:
- Using existing data: we’ll see how an investor has behaved to deduce his or her biases.
- Asking the investor questions: this is the technique we use at Neuroprofiler. We ask the customer questions, putting him or her in an investment situation, in particular as part of investor profiling. Based on their behavior during this questionnaire, we can deduce their behavioral biases and risk profile.
What types of financial institutions or investment professionals can benefit from using Neuroprofiler?
Our structure is BtoBtoC: we sell our solutions to financial institutions, which then make them available to their customers. These may be private banks, retail banks or asset managers.
Our priority market is Europe, with 70% of our customers outside France. We also have a customer in the United States, and prospects in Asia. We intend to expand outside Europe.
How do you measure the benefits you bring?
The three added values we offer our customers are :
- Compliance: our three solutions are fully compliant with the expectations of European, Swiss and British regulators. Some of our customers have been successfully audited by local regulators. In fact, we have obtained a partnership with “Price”, which has been able to audit our solutions. Finally, we have a privileged relationship with the regulators, whom we meet frequently. This enables them to follow the development of our solutions, and to tell us whether or not they are in line with their philosophy.
- Diversification of customer portfolios: thanks to profiling, and in particular risk profiling, we are able to promote greater risk appetite. Generally speaking, people tend to underestimate their risk appetite using conventional methods. On the contrary, we’re going to emphasize more risk appetite. With financial education, we give an opportunity to customers who, under MiFID regulations, only have access to simple products because their knowledge doesn’t allow them to access more. By training them, we open the way to more diversified products. Financial education and behavioral finance enable a bank to sell more products to its customers. To give a few figures, among our existing customers, we have been able to increase the number of risk-averse profiles from 20% to 40%.
- Customer satisfaction, customer loyalty: on average, we are given an 80% preference for our questionnaire over the classic ones. This highlights a better immediate customer experience thanks to gamification. What’s more, the fact that we’ve been recommended a product that suits our needs helps to build long-term customer loyalty.
What are your next steps?
We hope to be able to develop our three modules first in Europe, and then outside Europe, because although we comply with European regulations, they are very similar to those in other countries.
We have a real vocation to expand internationally. As we continue to grow, we are naturally increasingly recognized outside Europe, and therefore in demand.
And of course, we’re going to continue enriching our current modules, particularly with all the behavioral prediction stuff. We’d like to combine these two approaches: the use of data based on investor behavior, i.e. rooted in real life, and the collection of data from questionnaires.
By exploiting the data a bank is able to provide us on investors, and cross-referencing it with what we’ve been able to gather from our questionnaire, we could be even more refined in predicting their behavior and the advice we could give them.