Category: Research

More Info, More Money? How Financial Apps Actually Influence Behavior

It rings true that better access to financial information should help our financial fitness. Considering how much information we receive every single day, it would seem logical to assume that people are well equipped to make good choices.

Aside from our intuition and anecdotal evidence, do we really know if more financial information improves our finances? If so, how?

Relying only on our intuition to form conclusions is rarely a good idea. Adding a healthy dose of scientific rigour is a much better one.


Icelandic research

People of different ages use and adopt new information technology in different ways. That’s one of the reasons why it is very difficult to figure out how this tech actually influences people’s lives and behaviours.

Fortunately for us, the wise folk at the National Bureau of Economic Research got their hands on some in-depth data from Iceland and described their findings in the paper Fintech Adoption Across Generations: Financial Fitness in the Informational Age.

Most of the people in Iceland are using a common on-line platform to keep all of their bank account and transaction info in one place. The study included around 14 thousand of them and observed their financial habits between 2011 and 2016. A big change happened in 2014 with an introduction of a mobile app which gave the users a simpler way to access their financial information.

When the app was introduced, people started checking their information much more frequently. Before, they usually needed a desktop computer, but now it was possible to do it from anywhere, simply by using their smartphone.

The researchers had enough data to determine how frequently the users accessed their accounts and how much they were spending or saving. They also knew if people used credit or debit cards and if they had to pay any penalties.


Research results

The introduction of a mobile app caused a sharp reversal in the amount of bank and overdraft fees that the users had to pay. This was a sign for the researchers that the application was beneficial for the users’ financial welfare.

Easier monitoring of personal data was helping them in two ways: people could clearly see which information is important for them, and the access to that info was made simpler.

Bank fees and penalty payments around the app introduction


Men and women use the app in different ways

Researchers also noticed something else. Because they had a lot of data about the users (age, gender, etc.), they could see that the effects of the financial mobile app were very different between age groups and also between genders.

The app was more popular with men when it came to frequency of use. They were logging in roughly twice as much as women. This trend was similar through all age groups. However, the app had a greater financial impact on women when considering how much they’ve saved in late fees and credit use. This could mean that the improved access to the information improved their financial fitness more.

Share of adopters by gender and age groups


Not all generations benefit from more financial information

The smartphone app was adopted by users from all generations, but not all generations were using it to the same extent. The rate was highest for the younger group. After two years, 52% of Millennials were using it, and also around 41% of users from Generation X and 27% of Baby Boomers.

Another finding was that the oldest generation didn’t really benefit from the improved access to their financial information. Other two generations did, partly because of changes in accessing consumer credit.

For example, the use of credit cards went up by roughly 10% overall. Millennials in particular increased their use by 30%. That is a logical consequence of having better access to financial information, because credit card providers offer longer periods to pay your debts without charging any interest. With debit cards, the overdraft will get charged without delay.


Millennials approach finances differently

Millennials might be even more different in their approach to finances than many would assume. Facebook IQ: Digital Insight & Market Research wrote a paper about how the people born between 1980s and mid-1990s act much more cautiously and responsibly when it comes to paying down debt, using credit and saving.

At the same time many Millennials feel that they have no one to turn to for proper financial guidance. A generation that will in 2020 represent 35% of the global workforce feels disconnected from the financial service industry.


New definitions of financial success

The two main financial priorities for young working-age adults are saving for the future and paying off debt. Financial success means being debt free for 46% of participants, and only 21% see it in owning a home or being able to retire (13%).

Their sense of financial responsibility is also affecting the attitude towards using credit cards. Many see it as a strategic tool to build credit (46%) and fewer as the means for financial flexibility (36%). In addition, saving was also high on the list of priorities. 54% of Millennials in the research do it for the sake of simply being responsible for their financial futures.


Problems with financial literacy

More than half of the participants in the Facebook IQ’s research believe that they could not afford to deal with investments. Millennials, when compared to older generations, do not feel like they have enough knowledge about finances to make big decisions.

Also, more than half said that they do not know how to even begin with creating a financial plan for their future. A critical area of development seems to be financial literacy.


Potential for future financial services

Millennials are much more willing to change providers of services than the older generations. Whether it is banks, credit cards providers, insurance companies or brokerage accounts, younger generation will switch when a better option comes along. This means there is room for financial services that will know how to address the issues this generation is facing.

Another important element would be mobility, either to discuss and research finances, or to access and manage personal accounts. More than half of the people in the research regularly use mobile banking, and they prefer mobile services in general.

This generation has redefined financial success, is spending responsibly, and wishes to save diligently. Young users will entrust their finances to a partner who rewards their loyalty, shares their values and is able to provide relevant information whenever needed.


For more details check out the original articles:


… if you need any further scientific assistance with numbers, charts, funky helmets, large glasses or general tomfoolery, the Toshl monsters are here for you.

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