Financial innovation and risk perception in the financial system: Evidence from an online experiment

E. Lauretta and D. Santamaria

Economics Letters, 2025, vol. 254, issue C

Abstract: With FinTech, cloud banking, cryptocurrencies, and Artificial Intelligence (AI) shaping the future of the global financial system, it is crucial to understand perceptions in risk taking and risk-seeking in decision-making. A gap in knowledge exists on the “speed gap” between the complexity of financial innovation and agents’ ability to process new information. In response, this paper presents a pilot study into the Perception-Belief Behaviour (PBB) nexus. Using a sample of 30 finance students and an experimental economics-psychology approach to mimic the possible actions of financial agents, we find that financial innovation shapes financial agents’ preferences in taking up risk regardless of the financial environment they operate. Moreover, it is observed that financial innovation induces cognitive bias. Thematic conclusions and avenues for future research with economic and policy-relevant implications are discussed.

Keywords: Misperception; Financial innovation; Risk attitude; Framing effects; Speed gap; Information overload (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002940

DOI: 10.1016/j.econlet.2025.112457

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