8.1 Introduction

Millennials use technology differently than older generations: they use mobile devices more than laptops, they communicate with chats more than emails, they play digital games. Playing games is a fundamental attribute of humans, though shared in many forms by many animals, particularly in their formative months because it fosters learning by means of innocent experiences. Nowadays, Gamification is also a powerful method to achieve sustained innovation in financial services because it can provide a way for individuals to rewire their brains and bodies and achieve better investment behaviour against the imprints generated by financial events and the experience of their formative years. Moreover Robo-Advisors and digital wealth managers could find innovative ways to elicit investors' profiles and replace questionnaires with engaging experiences, and track individuals' behaviour and decision-making during their digital game to derive personality insights.

8.2 Principles of Gamification

Gamification is a way to improve productivity by working with the right mix of negative and positive emotions, challenges and rewards, a sense of accomplishment, and in some cases strengthened peering and social relationships. It is quite an innovative field of digital technology when applied to banking, aiming to take the essential ingredients of games and apply them to real world financial situations, such as saving, investing, and retiring. The idea of enhancing the theoretical knowledge and practical skills of individuals by engaging them with video games has a recognized antecedent in the aviation industry, which has utilized flight simulators to train pilots on strength simulations for many decades. Flight simulators allow verification of experts' knowledge and test their skills in a way that supports their optimal behaviour and reactivity when confronting unusual situations. The financial services industry has just started to learn how to train its professional workforce, for example with gaming sessions for financial advisors, but also how to provide long-tail customers with engaging user experiences to improve their investment behaviour, create stickiness, and enhance profitability.

Financial Gamification can be a powerful mechanism to learn how to tame emotions in order to size up higher return opportunities, face the potential realization of risks and losses, decide which risk management action seems better suited to mitigate them, and most of all visualize how uncertainty can affect our beliefs beyond personal knowledge, professional expectations, and measurable risk. Therefore, Gamification helps to stress test investment strategies, anticipate the consequences of a downturn on portfolio performance and asset allocations, and create an experience that customers can revert to if they need to stay invested during a market crash. All in all, individuals can verify the best mix of actions to improve the probability of achieving their financial goals, as single mental bets or within holistic experiences. Hence, Gamification speaks the language of Goal Based Investing and sits squarely at the crossroads between digital technology, behavioural finance, and motivation theory. Its capability to help individuals modify their investment behaviour is an attractive feature in facilitating the revolution in investment perspective advocated by Goal Based Investing, and learning to focus on the best actions towards an individual's goals rather than greed and fear stemming from attempts to tame the markets.

In fact, this innovation is not about learning new concepts, although it would definitely foster the financial education of the player, but rather experiencing the consequences of personal decisions when confronting expected and unexpected situations, thus the interaction between risk and uncertainty. Although grounded in scientific research and psychology, Gamification is much more an art than science, because it involves many elements of design, imagination, and emotional interaction which set it apart from well defined and replicable techniques. Most importantly, it should not be confused with promotional marketing, which is about sales and seeks to encourage a well defined action by means of a reward (as explained in Table 8.1). The scope of Gamification is not to give rewards or prizes to induce one-time consumption of a service or a product, such as opening an account. It attempts to engage individuals with the right mix of frustration and pride to induce a change in long-term behaviour and provide digital wealth managers with a reasonable stickiness in their clients' attitudes. In essence, it is about the user experience and hopes to attain the desired behaviour of the players by leveraging psychology to enhance their satisfaction.

Therefore, financial Gamification is about investors doing things differently and better. It is based on two main principles: continuous engagement and investment behaviour:

• continuous engagement: investors are invited to stay tuned and engaged by using game mechanics, as a way to enhance loyalty, favour cross-selling, focus on relevant news, and filter noise.
• investment behaviour: players are encouraged to play and learn the optimal game strategy, which ultimately corresponds to the optimal allocation of their ambitions, savings, investments, consumption levels and, last but not least, their fears.

The strategic focus on long-term customer behaviour explains the strong link to the theory of motivation and behavioural finance. Goal Based Investing Gamification does not focus on myopic motivators such as prizes, bonuses, or discounts. What matters are the intrinsic motivators of individuals. This is about their need for financial security, their aspiration to become, their desire to belong to a group. Successful Gamification requires a deep understanding of the multiple patterns of investment behaviour by focusing on emotional and graphical representation more than financial concepts and explanations. Therefore, the Probabilistic Scenario Optimization framework is well suited to act as the engine of Goal Based Investing Gamification, because it can provide the consistent simulation of real-world scenarios to create a graphical representation of the interaction between investment decision-making and otherwise complex market events and mathematical relationships.

Undoubtedly, games are a very attractive experience for human beings of all ages, not just children but also adults. The reason why games are so attractive to human beings is because they are about an engaging attempt to achieve well defined goals, and the learning of the best strategies and behaviours to attain them. Therefore, the ultimate financial innovation comes from achieving a transformational journey back to the roots of our human behaviour, which is not about rational investments but emotional decision-making, and rewiring our brains away from greed and fear, focusing on our real selves and motivations.

8.3 Gamification of Wealth Management

Robo-Advisors are digital tools targeting new investment behaviours, hence they would be naturally positioned to embrace Gamification. However, it is recommended that innovators carefully research their offers and the nature of the existing and prospective client base to identify how Gamification can fit into the processes. Being a long-term engagement, successful Gamification needs to be ingrained in conscious business and branding strategies, because it is intended to create emotional stickiness with customers and to last as business evolves, markets transform, and people change. Although a cost effective way to achieve innovation, not all wealth management offers can be unbundled into a gamified proposition. Hunter and Werbach (2012) have identified four criteria to guide decision-makers in the choice. Such products or services must be linked to a set of intrinsic motivators and gaming actions need to be meaningful; algorithms exist to model customer actions and their consequences and gaming experiences can reconcile conflicts within the prepotency of motivations. Thus, the following questions need to be answered:

• Motivation: where could a digital wealth manager derive value from encouraging the investment behaviour of actual clients?
• Meaningful choices: are the target activities related to advised products and services sufficiently interesting?
• Structure: can the desired investment behaviour be modelled through a set of algorithms?
• Potential conflicts: can the game avoid conflicts within the existing motivational structure of individuals?

We have discussed in previous chapters the relevance of the hierarchy of motivations and the corresponding wealth allocation framework, as a key factor to shape investment decision-making of taxable investors. It follows the emotional relevance of safety, peering, and aspiring. Money is an emotional thing, unlike electrons. Therefore, most actions directed to saving, investing, or retiring have a high level of motivational bias. Clearly, not all individuals exhibit the same, given their personal or generational values, family constraints, accumulated wealth, and biological propensity for risk-taking. Many individuals might believe that financial markets are not interesting, and that the impact of financial variables on everyday life is not relevant. Quite the contrary. The price of oil can affect economies, hence growth prospects of firms and families. Quantitative easing can reverberate into bull markets and the build-up of damaging bubbles. Knowingly or unknowingly, most of personal savings dedicated to retirement are nowadays linked to the cycles of financial markets (e.g., Australian superannuation funds).

Therefore, activities like retirement planning are becoming extremely relevant for a very large portion of the population, making Robo-Retirement Gamification a competitive breakthrough to engage taxable investors with meaningful and intuitive propositions. Philanthropy and investing with purpose, such as peer-to-peer lending to African households, can also be relevant for socially conscious individuals and provide the emotional leverage which Gamification can exploit. Since individuals are not identical, personalization remains a must, which Gamification can foster by inviting players to engage as avatars, whose attributes are tailored around actual individuals or their aspirations.

With regard to the use of algorithms, Robo-Advisors have already demonstrated the relevance of automated rebalancing for long-term investing, and Probabilistic Scenario Optimization has presented the advantages of working with scenarios to create meaningful simulations of risks and uncertainties.

As we have already learned, working with goals means working with conflicting mental accounts. Some goals refer to short-term necessities, others to long-term aspirations. In particular, individuals seem to be continuously trapped in the asset management perspective which encourages them to focus on myopic satisfaction as opposed to long-term investing. The conflict between short-term reward (e.g., myopic trading) and long-term benefits (e.g., automatic rebalancing of passive investment strategies) can be reconciled by means of Gamification.

We have discussed in previous chapters the relevance and the perils of the use of questionnaires to profile investors. Gamification could be a powerful diagnostic to detect ex-ante the potential behaviour of individuals when confronted with difficult financial decisions, such as stay the course during a downturn, rebalance when markets are rallying or confront return expectations with negative rates. The behaviour of an individual during a digital game could be tracked and reviewed by analytics to detect personality insights, reported and stored for compliance as part of more advanced processes of know your customer.

8.4 The Mechanics of Games

Gamification and promotional marketing are different because while marketing works on one side only of the emotional equation, that is reward, Gamification operates on the dark side of the game as well, that is pain. We have learned from behavioural finance that individuals are very asymmetrical in the perceptions of pleasure and pain stemming from financial gains and losses of the same magnitude. We have also learned that individuals wire experience through their emotional background and create personal biases based on life events and experiences during their formative years. Gamification can provide a way to rewire our brains and the way we engage emotionally by promoting new experiences that help to change investment habits and feelings. A well-designed Gamification experience would ignite players' emotions and craft an adequate balance between frustration (e.g., simulation of a financial loss) and price (e.g., achievement of a financial goal). This can be done by working on rules, challenges, and rewards. Rules create the boundaries that investors are invited to explore. For example, what would happen if we broke up portfolio diversification and piled up idiosyncratic risk, what if we kept high stocks of cash when inflation skyrocketed, or we lost our job but did not have any form of insurance to help us pay the mortgage? Challenges create the progressive engagement that encourages us to test our skills though we are uncertain of what comes next, and hence fail or succeed but always learn, stay tuned, and adapt. Rewards grant us the pride we deserve for having defined the best strategy to invest with awareness, that is being conscious of the perils. While reward mechanics take the form of points that we can share with peers, or more advanced leaderboards we can access, or virtual goods we are offered, the focus is directed to impacting our basic human motivations such as status, recognition, and self-expression. To succeed, goals need to be clear and progress needs to be monitored continuously to diagnose performance and provide feedback to achieve higher levels of mastery, as indicated by the player journey in Herger (2014) and sketched out in Figure 8.1. Therefore, games will provide scaffolding mechanisms, prompting hints, suggestions, or partial solutions to keep players progressing.

People enjoy games and keep on playing even when they fail, to get better and better at them because they can provide motivation even after failure. Therefore, they can equip us with contextual bridging, closing the gap between theory and life.

8.5 Conclusions

Gamification in banking and finance benefits from Goal Based Investing and behavioural finance, whose principles provide guidance to game mechanics. The potential capability of Gamification to help individuals modify their investment behaviour is an attractive feature to facilitate the digital revolution in the investment perspective advocated by this book. Although still visionary, Goal Based Investing Gamification could be the ultimate case of innovation at the crossroad between FINance and TECHnology.