Financial Overconfidence and High-Cost Borrowing: The Moderating Effect of Mobile Payments

Inadequate financial literacy and overconfidence in financial knowledge, coupled with the use of mobile payments (MPs), may contribute to harmful financial behaviors. While the relationship between financial knowledge confidence and financial behaviors is well documented, there is limited understanding of how financial confidence affects the use of alternative financial services (AFSs), such as payday loans, and how MPs moderate this relationship. This study examines the moderating effect of MPs on the association between financial knowledge confidence and the demand for AFS, utilizing data from U.S. adults surveyed in the 2018 National Financial Capability Study. The results show that individuals who use MPs are significantly more likely to engage with AFSs compared to non-users, with MPs increasing the likelihood of AFS usage by 92% (odds ratio: 1.92). Furthermore, overconfident individuals who use MPs are 94% more likely to rely on AFSs (odds ratio: 1.94). These findings highlight the need for targeted financial education and policymaking to mitigate the risks associated with financial overconfidence and MP usage.