Piece Of Cake

Based on research by Bruce Carlin, Li Jiang and Stephen A. Spiller

• ​Though financial literacy has been studied — and taught — for generations, new-media platforms such as YouTube offer new opportunities for educating consumers.
• YouTube and similar video platforms host all kinds of entertaining (and otherwise) content, but in recent years have become a major outlet for educational videos. 
• Viewers who watched a YouTube video on what to look for in credit card ads were more likely to choose the card with the best terms. 

Think of the last time that you read all the way through the terms and conditions on a credit card ad — or, even more worryingly, on your own credit card application. We all mean to make well-informed decisions, but the sheer quantity of words on many financial products can overwhelm. Even a financial professional can find it hard to hack through the verbiage.

But what if a simple video could clarify credit card terms and conditions for the layperson — or even the professional? 

With the rise of YouTube and other video social media, new opportunities to share all sorts of information abound. Each day, hundreds of thousands of people log onto YouTube “how-to” videos to learn about everything from building a house in the Arctic to baking a cake. It’s one of the most-used self-education channels available today. 

This teaching opportunity intrigued Bruce Carlin, now a professor of finance at Rice Business. Carlin was previously a professor at UCLA’s Anderson School of Business, and with Li Jiang and Steven A. Spiller, also of the Anderson School of Business, hypothesized that online video content could make specific financial knowledge accessible to a large population easily and quickly. 
 
To investigate, the researchers studied 1,603 participants with a median age of 30, whom they recruited through Amazon Mechanical Turk. These participants were randomly shown one of two “educational” videos: a baseline video featuring a character using a remote to uncover “hidden” messages in credit card advertising, and the same video with an added informational tag that summarized the messages and showed where to find key information in the standard terms in a credit card agreement. 

Once they’d viewed the videos, participants were randomly split into two groups. The first group reviewed a website with four credit card options, each linking to information described in the videos such as APRs, fees and spending limits. The second group reviewed the website as well — but this time, each of the four credit card options had a heading that was distracting or even misleading.

Regardless of which version of the website they were shown, the participants who had viewed the informational video that included a summary were more likely to choose a card with consumer-friendly terms. Within this group, those who weren’t exposed to the misleading headings were the most likely to make the consumer-friendly choice. 

“Distracting advertising curtails the time people invest in searching for the best alternative and causes worse decisions,” the researchers write. “Content geared toward giving better instructions helps to overcome this effect.” This content, they found, improves both the quality and the outcome of a person’s research.

But what good is a video if few people see it? Carlin and his colleagues next wanted to see if study participants who typically share videos via email or social media would share either version of the credit card tutorial. If they did, the researchers reasoned, the videos theoretically could protect a wide range of consumers.

But while participants who watched the videos came away better informed, they were less likely to share the version that included the summary and steps for action than the one that didn’t.

Was that because people are more inclined to share an entertaining or distracting video than a purely informative one? Was it because credit/financial literacy can be a touchy subject? Or was it simply that different kinds of videos require different metrics of success — for example, views rather than shares? Getting video viewers to share content that contains financial guidance, in other words, remains a fly in the batter. 

The researchers’ primary findings were clear, however: Online instructional videos can make a difference in consumers’ lives. Much like a cooking video that takes the viewer step-by-step to a glorious mille crepe, the right video can make even intimidating financial decisions a piece of cake. 

Bruce Carlin is a professor of finance at Jones Graduate School of Business at Rice University. 

To learn more, please see: Carlin, B. I., Jiang, L., & Spiller, S. A. (2018). Millennial-style learning: Search intensity, decision making and information sharing. Management Science, 64(7), 2973-3468.