Arvid Hoffmann, Simon McNair and Jason Pallant
The purpose of the paper is to examine how psychological characteristics predict membership of and transitions between states of higher vs lower financial vulnerability – and vice…
Abstract
Purpose
The purpose of the paper is to examine how psychological characteristics predict membership of and transitions between states of higher vs lower financial vulnerability – and vice versa – over time.
Design/methodology/approach
This research uses a dynamic latent class model (latent transition analysis) to explore the dynamics of consumers’ financial vulnerability over time using longitudinal data obtained by repeatedly administering a measure of financial vulnerability.
Findings
This research finds that consumers in a state of lower vulnerability are “fragile” in having a relatively high likelihood of moving to a state of higher vulnerability, whereas those in a state of higher vulnerability are “entrenched” in having a relatively low likelihood of moving to a state of lower vulnerability. This pattern of results is called the “financial vulnerability trap.” While financial self-efficacy explains state membership, the consideration of future consequences drives state transitions.
Research limitations/implications
Future research could follow consumers over a longer period and consider the role of alternative psychological characteristics besides those examined.
Practical implications
This research provides practitioners with actionable insights regarding the drivers of changes in consumers’ financial vulnerability across time, showing the value of financial self-efficacy and the consideration of future consequences when developing strategies to prevent consumers from sliding from a state of lower to higher financial vulnerability over time.
Originality/value
There is scant research on financial vulnerability. Further, prior research has not examined whether and how consumers’ psychological characteristics help explain their membership of and transitions between states of different levels of financial vulnerability over time.
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Rebecca Chan, Indrit Troshani, Sally Rao Hill and Arvid Hoffmann
This study aims to identify key factors driving consumers' adoption of Open Banking. It extends the Unified Theory of Acceptance and Use of Technology (UTAUT) by integrating…
Abstract
Purpose
This study aims to identify key factors driving consumers' adoption of Open Banking. It extends the Unified Theory of Acceptance and Use of Technology (UTAUT) by integrating perceived risk, initial trust and financial literacy into an overarching conceptual model.
Design/methodology/approach
Measurement items of the theoretical constructs included in the conceptual model were adapted from related literature and a set of hypotheses was developed. The hypotheses of the conceptual model were subsequently assessed with partial least squares structural equation modeling using a dataset of 456 Australian survey respondents.
Findings
The model has strong explanatory power with an R2 of 69.5%. Performance expectancy, effort expectancy, social influence and perceived risk are direct antecedents of consumers' usage intention of Open Banking. Social influence has a strong mediating effect on usage intention through performance expectancy. The effect of perceived risk is alleviated by effort expectancy and initial trust, while initial trust positively affects the effects of performance expectancy and effort expectancy on consumers' usage intention of Open Banking. Finally, financial literacy lowers initial trust towards Open Banking, possibly inducing consumer skepticism.
Practical implications
The results suggest that practitioners should focus on performance expectancy as a primary driver of Open Banking adoption, while understanding the role of other drivers, such as social influence and perceived risk in developing marketing strategies. Policy makers are recommended to adopt a governance approach to build initial trust amongst consumers.
Originality/value
This research contributes by providing an integrated and comprehensive model for explaining consumers' FinTech adoptions by extending the existing technology adoption model UTAUT to the Open Banking domain and integrating perceived risk, initial trust and financial literacy, thereby advancing and enriching the conceptual horizon of the extant literature.
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Kirti Goyal, Satish Kumar and Arvid Hoffmann
Prior work expresses concern about young people's rising debt and lack of financial preparedness. This study focuses on how financial socialization and psychological…
Abstract
Purpose
Prior work expresses concern about young people's rising debt and lack of financial preparedness. This study focuses on how financial socialization and psychological characteristics affect the personal financial management behavior (PFMB) of young professionals in India. The authors examine both the direct effect of these factors and the indirect effects through financial literacy and aforementioned psychological characteristics as mediators.
Design/methodology/approach
The authors develop a conceptual framework based on the extant literature and empirically test its hypotheses employing partial least squares structural equation modelling (PLS-SEM).
Findings
Attitude towards money, financial self-efficacy, financial risk tolerance, financial socialization through parental direct teaching and peers, and media are all positively associated with young professionals' PFMB, whereas external locus of control and procrastination are negatively associated with their PFMB. Almost all psychological characteristics partially mediate the association between financial socialization and PFMB. Finally, financial literacy plays a partially mediating role in the association between procrastination and PFMB as well as between financial socialization and PFMB.
Practical implications
This study helps regulators and policymakers understand PFMB among young professionals. Interventions should build on the positive role of financial socialization, cultivating a good attitude towards money and financial self-efficacy, and reducing reliance on an external locus of control and procrastination. This study also helps policymakers and financial educators develop societally beneficial personal finance programs.
Originality/value
This research investigates social, psychological and cognitive characteristics in a comprehensive framework to further the authors’ understanding of the topic of PFMB.
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Janin Karoli Hentzen, Arvid Hoffmann, Rebecca Dolan and Erol Pala
The objective of this study is to provide a systematic review of the literature on artificial intelligence (AI) in customer-facing financial services, providing an overview of…
Abstract
Purpose
The objective of this study is to provide a systematic review of the literature on artificial intelligence (AI) in customer-facing financial services, providing an overview of explored contexts and research foci, identifying gaps in the literature and setting a comprehensive agenda for future research.
Design/methodology/approach
Combining database (i.e. Scopus, Web of Science, EBSCO, ScienceDirect) and manual journal search, the authors identify 90 articles published in Australian Business Deans Council (ABDC) journals for investigation, using the TCCM (Theory, Context, Characteristics and Methodology) framework.
Findings
The results indicate a split between data-driven and theory-driven research, with most studies either adopting an experimental research design focused on testing the accuracy and performance of AI algorithms to assist with credit scoring or investigating AI consumer adoption behaviors in a banking context. The authors call for more research building overarching theories or extending existing theoretical perspectives, such as actor networks. More empirical research is required, especially focusing on consumers' financial behaviors as well as the role of regulation, ethics and policy concerned with AI in financial service contexts, such as insurance or pensions.
Research limitations/implications
The review focuses on AI in customer-facing financial services. Future work may want to investigate back-office and operations contexts.
Originality/value
The authors are the first to systematically synthesize the literature on the use of AI in customer-facing financial services, offering a valuable agenda for future research.
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Lachlan Schomburgk and Arvid Hoffmann
The purpose of this study is to examine how mindfulness reduces consumers’ buy-now-pay-later (BNPL) payment scheme usage and how that relates to their overall well-being.
Abstract
Purpose
The purpose of this study is to examine how mindfulness reduces consumers’ buy-now-pay-later (BNPL) payment scheme usage and how that relates to their overall well-being.
Design/methodology/approach
This study uses partial least squares structural equation modeling to test the hypotheses of a conceptual framework which is rooted in the extant literature, using an approximately representative sample of Australian consumers (N = 275).
Findings
This study finds empirical evidence for the ability of mindfulness to reduce BNPL usage through increasing consumers’ financial self-control and decreasing their impulse buying tendency. This study also obtains empirical evidence that greater BNPL usage is associated with lower subjective evaluations of consumers’ overall well-being by increasing their current money management stress and decreasing their expected future financial security.
Research limitations/implications
Future research could build on the effect of mindfulness that the authors find in this study and how it could be leveraged as a protective mechanism for consumers’ financial decision-making. Such research could involve mindfulness-based interventions, such as instant messaging within smartphone applications. Doing so would also help assess causality, thus addressing the limitation of the cross-sectional nature of this study.
Practical implications
The findings have implications for public policymakers and business practitioners. Financial counselors are encouraged to include the measurement of personality traits such as impulse buying tendency and financial self-control in intake meetings with clients and consider the benefits of offering short mindfulness training. Given the negative effect of BNPL usage on consumers’ financial and overall well-being, and the reputational risks this implies, BNPL providers are recommended to take more responsibility to ensure consumers do not fall into a debt trap, while retailers are advised to take steps to make payment processes more “mindful.”
Originality/value
Although mindfulness has established effects on consumer behavior, its beneficial influence on consumer financial decision-making has rarely been explored. This study also contributes to a better understanding of the antecedents and consequences of consumers’ BNPL payment scheme usage. Although its prominence is increasing in daily life, and despite the concerns of consumer advocates, policymakers and regulators regarding its risks, the topic of consumers’ BNPL usage has received little attention in academic research so far. Finally, this study extends the emerging financial well-being literature by demonstrating how BNPL usage can reduce consumers’ overall well-being through the mediating effect of increasing current money management stress and decreasing expected future financial security.
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Jaakko Aspara, Amitav Chakravarti and Arvid O. I. Hoffmann
This study aims to examine the interplay between focal and background goals in consumer financial decision-making and identify conditions that lead individuals to trade-off…
Abstract
Purpose
This study aims to examine the interplay between focal and background goals in consumer financial decision-making and identify conditions that lead individuals to trade-off financial returns for background goals.
Design/methodology/approach
The current research reviews the relevant literature on consumer financial decision-making and goal systems theory to develop a set of hypotheses that is tested using three experiments.
Findings
The experiments show that individuals who have been subtly primed with self-expressive background goals, or experienced progress toward the focal goal of financial returns, accept lower financial returns for the opportunity to invest in stocks that allow for increased self-expression. Further, while subtly primed background goals exert a non-normative influence on investment decisions, explicit cues about an investment’s background goal-instrumentality create a backlash effect, and decrease individuals’ willingness to trade-off financial returns.
Research limitations/implications
Future research could confirm the robustness of the findings of the present research by using different priming tasks and alternative ways of making the background goal explicit to individuals.
Practical implications
To achieve greater attraction among individual investors, it helps to frame a financial product or stock in communications materials in a way that sends subtle signals with which investors can identify. Such signals could include stressing the product/company’s home country (addressing individuals’ patriotism) or a particular product domain (addressing individual investors’ desire for interesting/exciting current/future products).
Originality/value
While previous research suggests that investment choices may be influenced by self-expressive motivations, to date, it remains unclear whether and when individual investors are actually willing to trade-off the focal goal of maximizing financial returns for the opportunity to satisfy alternative background goals.
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Arvid O. I. Hoffmann and Dana Ketteler
The purpose of this paper is to investigate the potential spill-over effects from negative (and positive) experiences with trading a company’s stock on shareowner-customers’…
Abstract
Purpose
The purpose of this paper is to investigate the potential spill-over effects from negative (and positive) experiences with trading a company’s stock on shareowner-customers’ emotions and subsequent customer attitudes and behavior.
Design/methodology/approach
A conceptual framework that links selling a stock for a loss (or gain), emotions, and customer attitudes and behaviors is developed. The framework is tested with data from a sample of Dutch investors that is analyzed with structural equation modeling through the partial least squares method in SmartPLS.
Findings
Selling a stock for a loss vs selling a stock for a gain have different effects on shareowner-customers’ attitudes and behavior toward the company. Losses induce negative emotions which in turn result in lower satisfaction and behavioral loyalty as well as in increased propensity to complain about the company. Investment gains, however, result in more positive emotions which then lead to increased preference of the company whose stocks were traded over its competitors and increased engagement in positive word-of-mouth (WOM).
Research limitations/implications
The study is focussed on shareowner-customers’ experiences with stocks of companies active in the consumer industry. Future research could address whether the results generalize to other industries.
Practical implications
The findings emphasize the importance of a close collaboration between the marketing and investor relation departments. Complaints of shareowner-customers should be taken seriously and incentives to stimulate repurchases as well as those that encourage positive WOM engagement are recommended.
Originality/value
This is the first study to examine possible negative spill-over effects from experiences obtained during stock trading on shareowner-customers’ attitudes and behaviors toward the stock’s company.
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Arvid O.I. Hoffmann, Aida Tutic and Simone Wies
The purpose of this paper is to show the role of educational diversity in improving investor relations (IR) quality and examine how this impacts the number of shareholder activism…
Abstract
Purpose
The purpose of this paper is to show the role of educational diversity in improving investor relations (IR) quality and examine how this impacts the number of shareholder activism incidents a firm encounters.
Design/methodology/approach
The paper reviews literature on marketing, finance, and corporate communications to develop a conceptual framework which is tested using a combination of secondary data and primary data collected through a survey amongst IR professionals working at companies in the Euronext 100 stock index.
Findings
The empirical results support the conceptual framework, showing higher IR quality levels and lower shareholder activism intensity for companies with educationally diverse IR teams. In particular, the presence of marketing and communication experts in IR teams contributes to higher IR quality and lower shareholder activism.
Research limitations/implications
Future research may investigate the robustness of the results with larger and internationally diversified samples and examine how, besides educational diversity, other organizational arrangements through which finance professionals work together with marketing and communication professionals impact IR quality.
Practical implications
The results suggest that to improve their IR quality and minimize shareholder activism, companies should check and when necessary increase the educational diversity of their IR teams.
Originality/value
This is the first paper investigating the role of educational diversity on IR quality and the impact on shareholder activism, developing and testing an innovative conceptual framework that integrates marketing, finance, and corporate communication theory.
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Arvid O.I. Hoffmann, Heiner Franken and Thijs L.J. Broekhuizen
The paper aims to identify which factors determine (German) retail banking customers' intention to adopt a new remuneration system for financial advice. The new system is a…
Abstract
Purpose
The paper aims to identify which factors determine (German) retail banking customers' intention to adopt a new remuneration system for financial advice. The new system is a pay‐per‐use advisory model that supersedes existing commission‐based advisory approaches.
Design/methodology/approach
The paper develops and tests a comprehensive conceptual framework that includes perceived innovation characteristics, relationship quality, and socio‐demographic and psychographic variables to explain adoption intentions of the new remuneration system. The data come from a survey among clients of a large German retail bank.
Findings
Perceived innovation characteristics (i.e. relative advantage) largely determine the intention to adopt the fee‐based advisory model. Consumer and relationship quality variables do not directly impact adoption intentions, but have an indirect effect through influencing perceived innovation characteristics and moderating their relative importance. Relationship quality indicators, such as satisfaction with the current service and trust in the bank or its employees, do not impact customers' intentions to switch to the new remuneration system.
Research limitations/implications
The paper describes a (case) study using data from a large German retail bank. Future research may investigate the findings' (international) generalizability using different datasets and also assess additional drivers of customers' intentions to adopt a fee‐based advisory model.
Practical implications
The results suggest that banks should always explain the relative advantage of financial service innovations to their clients, as existing satisfaction and trust levels are not sufficient to ensure adoption.
Originality/value
This is the first paper examining the adoption of a new remuneration system for financial advice in the retail banking industry. By assessing a variety of variables the authors increase understanding of why customers adopt or reject such complex and difficult to evaluate service innovations.
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Arvid O.I. Hoffmann and Cornelia Birnbrich
The purpose of this paper is to establish a conceptual as well as an empirical link between retail banks’ activities to protect their customers from third‐party fraud, the quality…
Abstract
Purpose
The purpose of this paper is to establish a conceptual as well as an empirical link between retail banks’ activities to protect their customers from third‐party fraud, the quality of customer relationships, and customer loyalty.
Design/methodology/approach
A conceptual framework is developed linking customer familiarity with and knowledge about fraud prevention measures, relationship quality, and customer loyalty. To empirically test the conceptual framework, data were collected in collaboration with a large German retail bank.
Findings
A positive association was found between customer familiarity with and knowledge about fraud prevention measures and the quality of customer relationships as measured by satisfaction, trust, and commitment. The quality of customer relationships, in turn, is positively associated with customer loyalty as measured by intentions to continue their relationship with and cross‐buy other products from their bank.
Research limitations/implications
The paper focuses on the German retail banking market and uses data from only one bank. Future research may investigate the generalizability of the findings across other banks, as well as other countries. Moreover, future research could address how specific anti‐fraud instruments and their communication differentially affect customer satisfaction, trust, and commitment.
Practical implications
The results stress the importance of fraud prevention for retail banks and show that besides the financial objective of reducing operating costs, fraud prevention and its effective communication is a meaningful way to improve customer relationship quality and, ultimately, customer loyalty.
Originality/value
This is the first academic study to empirically examine the relationship between a retail bank's (communication about) fraud prevention mechanisms and the quality of their customer relationships.