FinTech and social nudges: a zero-cost strategy to save more and invest better?

Abstract

Subjective decisions and individual behavior are strongly influenced by numerous emotional aspects and cognitive limitations, which often lead to a clear gap between theoretical predictions and empirical results. FinTech services are trying to solve these problems based on nudging techniques, the set of mechanisms that, taking advantage of our limited rationality, pushes us towards more effective behaviors, in this case, financial behaviors. The key to successful nudging in asset management is to identify and target particular irrational behaviors to prevent them from recurring. So this paper begins with our cognitive bias analysis, thus all those aspects that can make us deviate from more advantageous choices. Then we will analyze the nudges adopted by FinTech services that help us to correct our mental errors in savings, investment, and financing decisions. And finally, through a short experimental analysis, we will try to understand whether social nudging could also be implemented in FinTech reality as an additional weapon to fight the mental obstacles that afflict savers in the management of their finances. All things considered, the paper aims to study FinTech and social nudges: are they the key to win our cognitive bias?