Mind the app! Financial education and the lights and shadows of financial digitalisation

By Carmela Aprea & Tabea Bucher-Koenen
Posted on February 08, 2021

Digital financial services and products come in various shapes and sizes. They’re typically delivered through mobile phones, personal computers, the internet, or cards linked to a digital payment system, covering the entire range of digital financial applications. Think of cashless payment, online banking, digital lending platforms, cryptocurrencies and robo-advisors.

For developing countries – where the use of digital financial services is growing rapidly – these services hold great potential. But they’re also promising for high-income countries. Everywhere, the current COVID-19 pandemic has further increased the use of digital financial services, with social distancing reinforcing the use of digital payments for online shopping (versus brick-and-mortar shopping), the use of cash payments declining further to reduce physical contacts, and online banking services enjoying the advantage of functioning without personal interactions.

TFI project: creating a new model

With our TFI research project, we intend to develop a model for financial education that covers the key facets of digital financial literacy. How can financial education stimulate people to use digital financial services effectively and responsibly? We don’t only aim to identify the various opportunities, but also the risks that may arise when using these services. Our model could be used to help develop financial education strategies and, in particular, to optimize the design of financial literacy assessments and training interventions, making these more effective and tailored.

Digital services are transforming the financial industry, demanding more from consumers. Educators need to know how to shape their educational programs and how to best support the development and measurement of these financial competencies. In our project, we adopt a competence-oriented approach of financial education (Aprea & Wuttke, 2016), defining financial literacy as follows:

Financial literacy is the potential that enables a person to effectively and responsively plan, execute, and control financial decisions. As such, it is based on the availability of individual dispositions (knowledge and skills, motivations and interests, attitudes and values) and contingent on situational characteristics, including social and cultural aspects. The requirements for decision-making change according to the availability of certain tools, as it is the case with digital financial services.

We chose to combine two complementary studies. Firstly, we are conducting literature reviews, including (but not limiting ourselves to) studies that investigate opportunities and risks of digital financial services. We explore their usage and acceptance in different groups, and demonstrate how digital financial services affect financial decision-making.

Secondly, we are currently carrying out interviews with practitioners and experts in the field, to elaborate on the key facets of digital financial literacy. Experts include representatives from financial supervisory authorities, consumer protection associations, and banking and insurance associations.

Literature reviews: opportunities and risks of digital financial services

As Morgan and co-authors (2019) point out, digital financial literacy overlaps with both financial literacy and digital literacy, but it also has its separate aspects as well. According to these researchers, this is because of the specific opportunities and risks associated with digital financial services.

From a consumer perspective, we can highlight the following opportunities of digital financial services:

  • Digitalisation can make financial services borderless, which would allow people to easily access financial products and services in multiple geographies;
  • Digital financial services provide the potential of reducing gaps in financial inclusion and tailoring financial services to customers’ needs and preferences;
  • Financial digitalisation is also expected to support transparency and may help to solve the problem of unequal information;
  • Digital financial devices can also function as learning tools to increase people’s engagement with financial knowledge and help them when making financial decisions.
  • In a situation like the current pandemic, financial digitalisation could provide us all with social safety nets by facilitating government-to-public transfers and the provision of digital credit solutions.

These opportunities are counterbalanced by three major consumer risks:

  • Imprudent financial behaviours, such as impulsive or excessive consumption whilst shopping online, ultimately leading to problematic debt;
  • Data abuse and identity theft;
  • Financial fraud.

Next steps

We will further elaborate on the pros and cons of financial digital services using the data gathered from our interviews with the experts. We are curious to learn which financial decisions and behaviours could be seen as ‘favourable’ to exploit the opportunities and avoid the risks. What knowledge, skills and attitudes do consumers need to adopt these behaviours effectively? And what should a modern financial education framework look like?

Finally, we would like to find out how financial decision-making behaviours and knowledge, skills and attitudes should be prioritised for which target audiences, including particularly vulnerable and disadvantaged groups. We hope to publish our results within the next four months.

Carmela Aprea is Professor of Business and Economics Education at the University of Mannheim (Germany) and holds the Chair of Instructional Systems Design and Evaluation.

Tabea Bucher-Koenen is professor of Financial Markets at the University of Mannheim and head of the ZEW research department “International Finance and Financial Management” in Mannheim.

Both authors are also founding directors of the Mannheim Institute for Financial Education (MIFE)


  • Aprea, C. & Wuttke, E. (2016). Financial literacy of adolescent and young adults: Setting the course for a competence-oriented assessment approach. In C. Aprea, E. Wuttke, K. Breuer, N. K. Keng, P. Davies, B. Greimel-Fuhrmann & J. Lopus (Eds.), International Handbook of Financial Literacy (pp. 397–-414). Singapore: Springer.
  • Morgan, P. J., Huang, B., & Trinh, L. Q. (2019). The Need to Promote Digital Financial Literacy for the Digital Age. https://t20japan.org/wp-content/uploads/2019/03/t20-japan-tf7-3-need-promote-digital-financial-literacy.pdf