What if FinTech actually made us save less?

by Anastasiya Pocheptsova Ghosh & Liang Huang
Posted on November 21, 2019

Only half (55%) of American households can replace one month of their income with savings (The Pew Research Center 2015), and 41% of consumers cannot cover an immediate expense of $400 (Report on the Economic Well-Being of U.S. Households 2017). To improve their financial status, many consumers turned to financial technology (FinTech) to help them make better financial decisions: 83% consumers ask financial institutions (like banks and credit unions) for tools to help achieve their financial goals1.

In response, financial institutions and independent developers started offering personal finance applications to consumers. First such software, Mint, was marketed in 2007 and offers consumers easy-to-access real-time spending record, bank and credit cards information, and customized tips for savings. In 2019, virtually all major banks and many credit unions offer consumers some version of a financial management application. FinTech reached early mass adoption in 2017, with 33% of consumers being active users of FinTech services and 65% of consumers anticipating using FinTech services in the future2.

“People’s assessment of how much money is left in their budget is an important factor in their decision whether to spend and how much to spend.”

Improving budget adherence

Using FinTech to budget can alleviate two major types of bias in budget management: on the one hand the cognitive bias (remembering and calculating cumulative expenses), on the other hand the motivational bias (allocating expenses to budget categories). Therefore, one should expect that the effect of consumer adoption of FinTech, which provides consumers with accurate budget tracking, to be positive for budget adherence. In our study, we test whether financial technologies do indeed improve budget adherence, boosting consumer financial welfare.

People’s assessment of how much money is left in their budget is an important factor in their decision whether to spend and how much to spend. In general, consumers tend to spend more when they believe they have money available for spending3. However, they do not always have access to accurate information about their available budget. Due to difficulty remembering and calculating their cumulative expenses, consumers often feel uncertain about their budget standing4. To deal with this uncertainty, they often build in a “safety margin” to avoid overspending, thus spending less than the budget amount5.

Knowing = spending

Using FinTech to inform spending, we argue, reduces the uncertainty about money left in the budget. As a consequence, consumers using FinTech actually spend their budgeted amount. Apps and tools help them to monitor their spending, and to gain confidence about the amount of money left in their budget, increasing their spending.

We tested this proposition in a field study. We recruited approximately 300 US consumers (51% female, average age 31 years old, average monthly income of $4423), who had indicated to be interested in budgeting. They were asked to manage a certain budget allocated for dining out and grocery shopping. They set average monthly budget of $627 for this category and reported high motivation to budget and moderate difficulty in budget management. To approximate access to FinTech, one group of consumers received personalized budget standing information every other day. A second group of consumers did not.

Then we tested an intervention: a third group of consumers had the same access to budget standing information, but they were reminded that they had the option to roll over the money left in this budget to the next budget period. We reasoned this reminder made the boundary of a budget period more flexible, decreasing their likelihood to increase their spending by the end of the budget period.

“Reminding consumers that they can roll over the money left in the budget to the next period can attenuate the increase in spending.”

Roll over and save!

Our preliminary findings demonstrate that people who use FinTech to manage their budgets better – compared to those who do not – are more likely to increase their spending at the end of the budget period. Reminding consumers that they can roll over the money left in the budget to the next period can attenuate the increase in spending.

We also found that the difference in spending patterns (as described above) also affected the likelihood of them staying within budgets. Comparing their total spending for a week and their budgeted amount for the same time period showed that those consumers who received spending feedback spent on average $40 more than the budgeted amount, while those who did not receive such information, and those who received a gentle reminder to roll over their money, did not overspend, staying within their budgeted amounts.

Implications for consumers and FinTech

From the consumers’ perspective, we show that – contrary to common beliefs – using FinTech to inform budget standing can change consumer behaviour in an unexpected way: in the end, they’ll spend more. This suggests that consumers might want to adopt FinTech more wisely. Our study, for example, shows that they only spend more towards the end of their budget period. Perhaps, then, it’s a wise idea to depend less on FinTech tools as the budget period comes to an end.

From FinTech sector’s perspective, we show that providing consumers with personalized information about their budget standing does not always help them achieve their financial goals. We proposed a way to help FinTech apps better serve the financial needs of its users: simply reminding consumers they don’t have to spend their entire budget in a single month.


  1. CSI (2018): Https://Www.Bankingexchange.Com/Component/Rsform/Form/11-Executive- Report-Csi-Consumer-Poll-201
  2. Fintech Adoption Index (2017): Https://Www.Ey.Com/Publication/Vwluassets/Ey-Fintech- Adoption-Index-2017/$FILE/Ey-Fintech-Adoption-Index-2017.Pdf
  3. Van Ittersum, Koert, Joost ME Pennings, and Brian Wansink (2010), “Trying Harder and Doing Worse: How Grocery Shoppers Track In-Store Spending,” Journal of Marketing, 74(2), 90-104.
  4. Cheema, Amar, and Dilip Soman (2006), “Malleable Mental Accounting, The Effect of Flexibility on The Justification of Attractive Spending and Consumption Decisions,” Journal of Consumer Psychology, 16(1), 33-44.
  5. Van Ittersum, Koert, Brian Wansink, Joost ME Pennings, and Daniel Sheehan (2013), “Smart Shopping Carts: How Real-Time Feedback Influences Spending,” Journal Of Marketing, 77(6), 21-36.