Scarcity mindset's positive association with using alternative financial services.

Area of Science:

• Behavioral Economics
• Financial Psychology

Background:

• The scarcity mindset, characterized by a perceived lack of resources, can influence decision-making.
• While it may help address immediate needs, it can also lead to oversight in other areas.
• Understanding its impact on financial service utilization is crucial.

Purpose of the Study:

• To investigate the association between a scarcity mindset and the use of alternative financial services (AFS).
• To determine if this association persists independently of known AFS predictors.
• To examine if the relationship varies across different household income levels.

Main Methods:

• Utilized data from the 2021 FINRA National Financial Capability Study (N=24,349).
• Employed binary logistic regression analyses to assess the relationship.
• Controlled for established predictors of AFS use and socio-demographic factors.

Main Results:

• A stronger scarcity mindset was significantly positively associated with the use of alternative financial services.
• This association remained significant after controlling for other predictors and socio-demographic variables.
• The scarcity mindset predicted AFS use across all income groups, including high-income individuals.

Conclusions:

• The scarcity mindset is a significant predictor of alternative financial services use, irrespective of household income.
• Findings suggest the need to consider the psychological impact of scarcity on financial choices.
• Implications extend to evaluating the role of scarcity mindset in emerging financial products like fintech applications.