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Financial Knowledge, Risk Preferences, and the Demand for Digital Financial Services

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Listed:
  • Christian Königsheim

    (University of Hamburg)

  • Moritz Lukas

    (University of Hamburg)

  • Markus Nöth

    (University of Hamburg)

Abstract

Financial knowledge and risk preferences explain a large part of the variation in important financial decisions of households such as stock holdings, personal debt, retirement savings, or the adoption of financial innovations. Based on a survey among more than 1 700 customers of a German retail bank, we find that both financial knowledge and risk tolerance are significantly positively correlated with the likelihood to use digital financial services. As in previous studies, gender, age, and education additionally influence this decision. Moreover, individuals preferring the traditional banking solution require a higher compensation to switch to a digital service provider than customers of a digital service provider require to switch back to the retail bank, which we interpret as further evidence for the central role of financial knowledge and risk preferences. Our results have implications for both traditional banks and providers of digital financial services.

Suggested Citation

  • Christian Königsheim & Moritz Lukas & Markus Nöth, 2017. "Financial Knowledge, Risk Preferences, and the Demand for Digital Financial Services," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 18(4), pages 343-375, October.
    • Handle: RePEc:spr:schmbr:v:18:y:2017:i:4:d:10.1007_s41464-017-0040-0
    DOI: 10.1007/s41464-017-0040-0
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    2. Maik Dehnert, 2020. "Sustaining the current or pursuing the new: incumbent digital transformation strategies in the financial service industry," Business Research, Springer;German Academic Association for Business Research, vol. 13(3), pages 1071-1113, November.
    3. Niyati Jain & T. V. Raman, 2022. "A partial least squares approach to digital finance adoption," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 27(4), pages 308-321, December.
    4. Mohammed Anam Akhtar & Imran Khan & and Khurram Ajaz Khan, 2023. "Linking Financial Capability, Advice, Anxiety, Social Security, and Residential Status with Outward Remittances: Evidence from the UAE," Contemporary Review of the Middle East, , vol. 10(4), pages 386-407, December.
    5. Ozili, Peterson K, 2020. "Contesting digital finance for the poor," MPRA Paper 101812, University Library of Munich, Germany.

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    More about this item

    Keywords

    Digital finance; Early adopters; Financial literacy; Risk preferences;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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