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Visualizing Financial Futures

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Visualizing Financial Futures Visualizing Financial Futures SUSANNA HEYMAN DOCTORAL THESIS NO. 17. 2017 KTH ROYAL INSTITUTE OF TECHNOLOGY SCHOOL OF COMPUTER SCIENCE AND COMMUNICATION DEPT. OF MEDIA TECHNOLOGY AND INTERACTION DESIGN SE-100 44 STOCKHOLM, SWEDEN TRITA-CSC-A-2017:17 ISSN-1653-5723 ISRN KTH/CSC/A--17/17-SE ISBN 978-91-7729-471-9 AKADEMISK AVHANDLING SOM MED TILLSTÅND AV KTH I STOCKHOLM FRAMLÄGGES TILL OFFENTLIG GRANSKNING FÖR AVLÄGGANDE AV TEKNISK DOKTORSEXAMEN FREDAGEN DEN 8 SEPTEMBER 2017 KL. 13:00 I SAL F3, KTH, LINDSTEDTSVÄGEN 26, STOCKHOLM. Abstract Research on financial decision aids, systems designed to help people make financial decisions, is sparse. Previous research has often focused on the theoretical soundness of the advice that the systems provide. The original contribution of this doctoral thesis is a set of empirical studies of how non-expert people understand the advice provided by financial decision aids. Since every piece of advice must be interpreted by a receiver, the accuracy of the advice can be corrupted along the way if the receiver does not understand complicated terminology, probabilistic reasoning, or abstract concepts. The design concept resulting from the studies visualizes a unique combination of short-term and long-term variables that are usually treated as separate and not interacting with each other; loans and amortizations, insurance, retirement saving, and consumption. The aim is to visualize the consequences of different decisions and possible adverse events in terms of their effect on the user’s future consumption, rather than abstract numbers detached from the user’s lived experience. The design concept was tested and evaluated by personal finance experts and professional financial advisors, as well as students and people without financial education, who represented the target users of the system. Results indicate that the system has a learning curve, but that once users understand how to read the graph, they find it more informative than conventional financial planning tools. Keywords Human-computer interaction; personal finance; fintech; behavioral economics; retirement saving; persuasive technology; financial literacy; data visualization; graph perception; external cognition; distributed cognition Sammanfattning Tidigare forskning om datorhjälpmedel för privatekonomiskt beslutsfattande har syftat till att bedöma hur korrekta råden är som genereras av systemen. Bedömningarna har gjorts av experter, som ibland har uttalat sig om systemens användarvänlighet men utan att testa det på vanliga användare utan utbildning i ekonomi. Den här doktorsavhandlingen innehåller ett antal studier av hur vanliga människor förstår de råd de får av datorsystem för ekonomiskt beslutsfattande. Även om råden som genereras av systemet är korrekta, så är de inte användbara om användaren tenderar att misstolka eller bli förvirrad av exempelvis komplexa begrepp eller resonemang som bygger på sannolikheter. Designkonceptet som genererats av studierna utgör en modell som visualiserar en kombination av risker och parametrar som verkar på kort och lång sikt, och som mig veterligen inte har kombinerats tidigare i samma visualisering. Dessa parametrar, exempelvis bolån och amortering, försäkringar, pensionssparande och konsumtion, brukar vanligtvis hållas åtskilda när man planerar sin ekonomi. Idén med designkonceptet är att få en större överblick över konsekvenserna av beslut och risker, och hur dessa påverkar användarens framtida konsumtionsutrymme. Avhandlingen beskriver hur designkonceptet har testats och utvärderats av experter på privatekonomi, professionella ekonomirådgivare och studenter samt personer utan särskild ekonomisk utbildning, vilka representerar systemets målgrupp. Resultaten visar att det tar ett tag att lära sig hur man läser visualiseringsmodellen, men att när man väl har förstått det upplever man vanligen att det ger en tydligare bild av framtiden än konventionella planeringsverktyg. Nyckelord Människa-datorinteraktion; privatekonomi; fintech; behavioral economics; pensionssparande; persuasive technology; financial literacy; datavisualisering; graph perception; external cognition; distributed cognition Preface The idea to write a thesis like this came to me while I worked as an interaction designer in the finance sector. While we all agreed that our job was to help our customers understand their financial situation, there did not seem to exist any known best practices. What sort of information can be misleading? What type of design leads to what user behavior? What are some dos and don’ts for designing finance applications? I searched for handbooks on the design of personal financial management tools, but I did not find any. Not even an article or a blog post! Disappointed in the meager result from my search for guidelines and best practices, I decided to write the handbook that I wanted to read. This thesis is the end product. In chronological order, I want to thank Kent Eriksson for believing in my idea for this thesis project and finding the funds. Thanks to VINNOVA for funding the early research and to KTH for funding the later. I also want to thank Johan Tjernell, my manager at my ordinary job, who supported me when I wanted to take time off for PhD studies. My deepest thanks to Henrik Artman, my main supervisor who always had time, always was on my side, and showed commitment well beyond the expected. I could not have wished for a better supervisor. Thanks to my co-supervisors Inga-Lill Söderberg and Mario Romero for many long and interesting discussions, as well as great teamwork with the practical aspects of studies. I have had hours and hours of fun discussing personal financial management tools and methodology in this interdisciplinary group. Thank you Niklas Rönnblom, my husband and best friend who always encouraged me, believed in me, and pulled me through some of the darkest times of my life. I love you. Stockholm, July 1st 2017 CONTENTS 1 INTRODUCTION ...................................................................... 1 1.1 RESEARCH FIELDS ..................................................................................... 5 1.2 DELIMITATIONS .......................................................................................... 5 1.3 RESEARCH QUESTIONS .............................................................................. 7 2 BACKGROUND ..................................................................... 10 2.1 FINANCIAL PLANNING ............................................................................... 10 2.2 PSYCHOLOGY, COMPUTERS, AND PERSONAL FINANCE ................................ 15 2.3 PREVIOUS WORK ON FINANCIAL PLANNING SYSTEMS .................................. 34 3 THE SWEDISH CONTEXT .................................................... 52 4 METHODS & APPROACH .................................................... 57 4.1 METHODOLOGY ....................................................................................... 58 4.2 EXPLORATORY METHODS ......................................................................... 59 4.3 CREATIVE METHODS ................................................................................ 59 4.4 EVALUATIVE METHODS ............................................................................. 60 4.5 SUMMARY ............................................................................................... 63 5 RESULTS ............................................................................... 64 5.1 EXPLORING EXISTING FINANCIAL PLANNING SOFTWARE .............................. 64 5.2 CONSTRUCTING A PROTOTYPE .................................................................. 88 5.3 TESTING THE PROTOTYPE ...................................................................... 103 5.4 IMPROVING THE PROTOTYPE ................................................................... 152 6 DISCUSSION & CONTRIBUTION ....................................... 198 6.1 THE RESEARCH QUESTIONS ................................................................... 198 6.2 THE AIM OF THE THESIS ......................................................................... 199 6.3 CONTRIBUTIONS TO RESEARCH ............................................................... 201 6.4 CONTRIBUTIONS TO SOCIETY .................................................................. 205 6.5 LIMITATIONS .......................................................................................... 208 6.6 FUTURE WORK ...................................................................................... 211 6.7 FUTURE RESEARCH ............................................................................... 212 6.8 FINTECH CRITIQUE: A RESEARCH AGENDA .............................................. 214 7 REFERENCES ..................................................................... 216 APPENDIX 1: ADDITIONAL FUNCTIONALITY ....................... 229 1. INTRODUCTION | 1 1 INTRODUCTION In recent years, designers and Human-Computer Interaction (HCI) researchers have taken up an interest in using design to improve the world. There are computer systems and mobile apps designed to help us consume less energy1, quit smoking2, exercise more3, eat better4, and improve our mental health5. Within HCI as a research field, there are subfields dedicated to using computers and technology to save the climate 6 , end poverty 7 , and promote global peace 8 . Design for environmental conservation, often called sustainable HCI, and design for healthy living and sound medical practice, sometimes called e-health,
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