Financial Decision Making: Why Do So Many Of Us Get It Wrong?
If you were to look at the state of consumer finance in late 2021, you would be forgiven for thinking that the whole sector had taken a bizarre turn. From people sharing memes about buying Lamborghinis with Bitcoin, to Elon Musk’s tongue-in-cheek tweeting of financial advice, and the birth of GameFi—a sector comprising of a handful of blockchain-based video games where players are able to earn digital currency that can later be swapped for crypto—the situation is in a complete state of disarray.
The events of the past few years have upset almost all aspects of our everyday lives, but there is perhaps nowhere where this disruption is as visible as in financial services. In this industry, long associated with tech-driven innovation, the pandemic, with its resulting confusion and skyrocketing hours of screen-time, was just the final link in a chain of events that led us to where we are today.
As a result of technological advances and a changing regulatory landscape, the number of digital providers of financial products catering to the everyday user has ballooned—with some of them adopting increasingly aggressive marketing strategies. And yet, while the range of financial products expands, the number of unbanked or underbanked people in countries such as the US remains high, at 14.1 million and 48.9 million respectively. This, in turn, is pushing some underserved individuals to shun the system entirely, stockpiling savings within their homes. Perhaps more worryingly, others are risking their finances by turning to less conventional, and sometimes less reliable, financial services providers.
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