Financial literacy, financial behavior and financial resilience: the mediating role of digital financial services

Abstract

Purpose This study aims to find if subjective financial knowledge (SFK), objective financial literacy (OFL) and financial behavior are associated with financial resilience, directly and indirectly through digital financial services (DFS) comfortability. Design/methodology/approach Using data from the European Union (n = 16,988), a logistic regression model is used for the analysis purpose. Furthermore, Model 4 in the PROCESS macro for SPSS is used to conduct mediation analysis. In addition, several sensitivity checks, sub-sample analyses and endogeneity checks were applied to see if the results remain robust. Findings The findings indicate that SFK, OFL and financial behavior are positively associated with financial resilience. Other results show that DFS comfortability plays a partial yet strong mediation role. These findings remain the same after applying several sensitivity and endogeneity checks. Practical implications Regulators should ensure that people have ease of access to DFS and there are no security concerns regarding using DFS. Furthermore, policymakers can design specific policies for financial institutions in paving the way to design relevant financial products for their clients, which will assist them in raising their financial resilience levels. Originality/value The results add value to the growing literature on financial literacy, financial technology (FinTech) and financial resilience. Furthermore, this study integrates the resource-based view and the dynamic capabilities view to demonstrate that individuals' internal resources and dynamic capabilities are important proficiencies to overcome future financial shocks.