Slide 1

Financial Education and Mobile Technology

February 23, 2010
Board of Governors of the Federal Reserve System
Washington DC

Graphic image of DCD Fund Doorways to Dreams
Copyright 2009 DCD Fund, Inc.

Slide 2

Doorways to Dreams (D2D)

Doorways to Dreams (D2D) Fund (www.d2dfund.org) founded in 2000 by Harvard Business School Professor & Senior Associate Dean, Peter Tufano

• National non-profit 501(c)3 headquartered in Roxbury, Massachusetts
• mission to increase access to financial services, especially asset-building tools, for working poor Americans
• Focus on
  • Innovation
  • Scale
  • Real-world testing

Slide 3

Financial Education

Need:

• Knowledge level low
  Fewer than 1/3 of young adults answer correctly basic questions on interest rates, inflation & diversification (Lusardi, Mitchell & Curto, 2010)
• Financial readiness poor
  - 46 percent of Americans are unsure they can come up w/ $2k in 30 days, from savings, borrowing or otherwise (Tufano, Lusardi & Schneider, 2009)
• Need for educated consumers is rising
  - must navigate more choices, responsibility (e.g., retirement plan shift from defined benefit to defined contribution)
  - Most vulnerable consumers generally are least well prepared

Status of Field:

• Content: often comprehensive, focused on building knowledge and skills
• Delivery: typically group-based in person, or self-study (offline / online)
• Effectiveness: literature review showed modest or inconclusive results from 27 studies of financial education (Collins & O’Rourke, 2009)

Slide 4

Financial Education & Mobile Technology

Mobile Technology

• Personal / portable
• Interactive
• High-tech (smart phones)

Implications for Financial Education

• Delivery
  - reach consumers anytime, anywhere
  - allow timely, on-demand information "pulls"
  - access to consumers with greatest need (young, lower-income)
• Content
  - interactive
  - personalized, relevant
  - From simple (text message) to complex (smart phone app)

Graphic image of a hand and iPhone

Slide 5

An Alternative Vision: Financial Entertainment

"D2D’s vision is financial entertainment. Taking cues from business and entertainment, we need to work with and for consumers in the development of engaging new media that teach them how to better manage their money."

Financial Entertainment is:

• fun / engaging
• convenient
• accessible
• relevant / timely

We envision a library of casual video games, each teaching simple financial lessons such as:

• Wise use of credit & debit cards (Celebrity Calamity)
• Personal budgeting (in development, Groove Nation)
• Basic calculations, like compound interest
• Assessing financial service offerings
• Awareness of expensive pitfalls (e.g., check cashing, payday lending)

Slide 6

Why Video Games? Four Elements of Learning

Learning to Learn

• Games teach users how to play as they pass through each level by introducing new concepts or degrees of difficulty
• Levels are just hard enough for the user that they encourage learning and adaptation of new skills, evolve in complexity and result in simultaneous feelings of pleasure and frustration

Practice and Feedback

• Levels allow for distributed practice across time, which reinforces skills
• Users can learn at their own pace- games typically allow users to play levels until skills are acquired
• Repetition- users can replay levels that they may have already mastered to reinforce their skills

Engaging and Motivating

• The graphics, sound, and action of a game stimulate players, drawing them in and motivating them to learn to play
• Users are motivated to win the game, and therefore require that they learn new skills required for successful game completion

Transferable Skills

• Users are often forced to make good decisions under stress, make moral choices, take risks, and deal with an onslaught of data
• Higher Order Thinking Skills such as problem solving, strategic thinking, and interpretative analysis are often required to play

Notes: High Score Education: Games, not school, are teaching kids to think. http://www.wired.com/wired/archive/11.05/view.html. By James Paul Gee

- Video games provide mental training, learning how to learn. Levels are just hard enough for the user that they encourage users to learn, adapt use new skills, and evolve (know as regime of competence principle in cognitive science)- resulting in simultaneous feelings of pleasure and frustration. Hard/ complex games sell, easy ones don’t- game designers have to teach players how to play the games as they pass through each level. Video Games, New Teaching Tool http://www.channel3000.com/education/4121724/detail.html

- Users learn by doing. Supplemental information can be included. Games help you "learn and play" http://news.bbc.co.uk/1/hi/technology/4182023.stm

-"Getting a simulated person to perform everyday activities in a make-believe world and having them described in a foreign language could be a powerful learning aid, he believes. Before now, he said, educational software titles suffer by comparison with the slick graphics and rich worlds found in games." Researchers Explore how violent video games are exemplary aggression teachers http://www.eurekalert.org/pub_releases/2007-11/isu-reh111307.php

"The paper presents conceptual and empirical analyses of several of the "best practices" of learning and instruction, and demonstrates how violent video games use those practices effectively to teach aggression. It documents how violent video games motivate learners to persevere in learning and mastering skills to navigate through complex problems and changing environments -- just like good teachers do. The study describes seven parallels between video games and effective teachers, including the ability to adapt to the level of each individual learner -- requiring practice distributed across time -- and teaching for transfer to real-world situations. …But this study is not all bad news for video game technology. Because video games were found to be such effective teaching tools, the Gentiles propose greater educational use of today's smarter technology found in those games -- technology that "thinks" along with students, adapting instruction to each student's current skills, strategies or mistakes."

Games can be teaching tools, author says. http://www.australianit.news.com.au/story/0,24897,18367995-15321,00.html. "Children benefit from video games in many ways, including learning to work effectively with others, he says. "They learn to make good decisions under stress, they learn new skills, they learn to take prudent risks, they learn scientific deduction, they learn to persist to solve difficult problems, dealing with large amounts of data, they learn to make ethical and moral decisions and to even manage, in many games, businesses and other people," Prensky says. " Video Game Aids in Business Teaching http://media.www.dailytarheel.com/media/storage/paper885/news/2007/11/19/University/Video.Game.Aids.In.Business.Teaching-3109811.shtml

"The game builds on one's business and information technology skills, putting the gamer in a virtual office with the task of improving business procedures…. Innov8 opens the door to a new style of teaching in the classroom beyond lecture-style: Making class more interactive helps students simultaneously enjoy class and learn, Lapp said." Educators Turn to Games for Help http://www.wired.com/gaming/gamingreviews/news/2003/08/59855 It (the Digital Media Collaboratory @ U of Texas at Austin’s IC2 Institute), created a pilot program in 1998 called EnterTech, a 45-hour training simulation that teaches 44 entry-level job skills through digital role playing. The results stunned everyone. Of the 238 participants, two-thirds of the group either found work or enrolled in continuing-education programs. Those who ended up working received a $1.06 average increase in salary.
Many commercial titles offer just drill-and-practice lessons, which some experts believe defeats the purpose of using video games.

"Games teach systematic things much better than they teach facts," Massachusetts Institute of Technology professor Henry Jenkins said. "(The game) Civilization teaches how history unfolds, and it also helps show how choices affect events in the future."

Slide 7

D2D's First Game: Celebirty Calamity

Graphic image of the text Celebrity Calamity

In this casual game, players become the financial manager for up-and-coming celebrities who spend beyond their means. Players must effectively use a bank account, debit card, and credit card to be successful.

While focused on fun, the game’s explicit learning objectives include:

• Paying more than the minimum credit card payment;
• Minimizing credit card finance charges;
• Avoiding all fees including bank overdraft, credit card late payment, and credit card over-limit; and
• Making good annual percentage rate (APR) choices.

The game also includes a number of implicit learning objectives, such as raising awareness of spending behavior and the value of saving money.

Next Step: Celebrity Calamity (and its successors) for smart phones

Slide 8

Measuring Success

How we measure success:

• Engagement: Given the opportunity, will and how much will a target audience choose to play a financial education game? How does this compare to take up of other financial education and decision making tools?
• Knowledge & Skills: Does the game teach? What does it teach? Does it teach some concepts better than others? Self-Confidence / Self-Efficacy: Does game play improve financial skills self-confidence?
• Behavior Change: What impact does the play of financial education casual games have on real world behavior?

Other issues:

• Role of Frequency: What, if anything, can we learn about the impact of game play repetition and frequency on outcomes?
• Impact Persistence: How long will positive outcomes persist?

Slide 9

Key Questions

Whether mobile devices fulfill their promise in the financial education arena hinges on several key questions:

• Adoption – how quickly will consumers, especially vulnerable consumers, adopt (smart) phones?
• Distribution – how do we reach large numbers of mobile device holders with financial education offerings?
• Content – what engaging, effective content can be developed across the range of mobile devices, from simple to smart phones?
• Impact – will the personal, portable, interactive nature of mobile devices lead to greater:
  - Reach
  - repetitive engagement
  - timely engagement

Slide 10

Contact Information

Timothy Flacke
Executive Director
Doorways to Dreams (D2D) Fund, Inc.
[email protected]
www.d2dfund.org
(617)541-9066