Empowered to Detect: How Vigilance and Financial Literacy Shield Us from the Rising Tide of Financial Frauds

Rizky Yusviento Pelawi (), Eduardus Tandelilin, I Wayan Nuka Lantara and Eddy Junarsin
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Rizky Yusviento Pelawi: Faculty of Economics and Business, Universitas Gadjah Mada, Yogyakarta 55281, Indonesia
Eduardus Tandelilin: Faculty of Economics and Business, Universitas Gadjah Mada, Yogyakarta 55281, Indonesia
I Wayan Nuka Lantara: Faculty of Economics and Business, Universitas Gadjah Mada, Yogyakarta 55281, Indonesia
Eddy Junarsin: Faculty of Economics and Business, Universitas Gadjah Mada, Yogyakarta 55281, Indonesia

JRFM, 2025, vol. 18, issue 8, 1-24

Abstract: According to the literature, the advancement of information and communication technology (ICT) has increased individual exposure to scams, turning fraud victimization into a significant concern. While prior research has primarily focused on socio-demographic predictors of fraud victimization, this study adopts a behavioral perspective that is grounded in the Signal Detection Theory (SDT) to investigate the likelihood determinants of individuals becoming fraud victims. Using survey data of 671 Indonesian respondents analyzed with the Partial Least Squares Structural Equation Modeling (PLS-SEM), we explored the roles of vigilance and financial literacy in moderating the relationship between fraud exposure and victimization. Our findings substantiate the notion that higher exposure to fraudulent activity significantly increases the likelihood of victimization. The results also show that vigilance negatively moderates the relationship between fraud exposure and fraud victimization, suggesting that individuals with higher vigilance are better at identifying scams, thereby decreasing their likelihood of becoming fraud victims. Furthermore, financial literacy is positively related to vigilance, indicating that financially literate individuals are more aware of potential scams. However, the predictive power of financial literacy on vigilance is relatively low. Hence, while literacy helps a person sharpen their indicators for detecting fraud, psychological, behavioral, and contextual factors may also affect their vigilance and decision-making.

Keywords: fraud victimization; fraud exposure; vigilance; financial literacy; PLS-SEM (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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