Abstract:Legislators in developed countries are loss‐averse and hesitant to make regulatory changes to accommodate new technologies, fearing destruction of a system that works.
“…Nevertheless, loss aversion is stronger in wealthier countries such as Luxembourg, the Netherlands, Austria, and Germany. These findings are consistent with Ashta (), who argues that loss aversion tends to be lower in poorer countries, since many individuals do not have the possibility of losing too much according to their limited liability. However, other scholars such as Foellmi et al () argue that countries with low levels of GDP per capita tend to suffer a greater loss aversion effect.…”
Section: Discussionsupporting
confidence: 91%
“…For example, De Neve et al () find that individual well‐being is more than twice as sensitive to economic downturns as compared to equivalent upswings using a measure of economic growth. While some scholars have suggested a negative correlation between different degrees of loss aversion and macroeconomic indicators such as GDP and consumption per capita (Foellmi et al, ), other studies argue exactly the opposite (Ashta, ). In countries with a low GDP per capita, where the poor have a limited liability since they do not have the possibility of losing anything, they may experience lower levels of loss aversion than other countries.Hypothesis 2: Countries with a lower level of GNI per capita are more likely to experience loss aversion in saving behavior.…”
Section: Loss Aversion In Saving Behavior: Evidence At Individual Andmentioning
Evidence is mounting that individuals do not always behave as strictly 'rational' customers of the banking sector as neoclassical models of economics would assume. Instead, scholars and policymakers are increasingly arguing that behavioral economics offers a more useful and realistic means of understanding customer behavior in the real economy. Drawing on data from the first European Central Bank harmonized household survey at the European level and Eurostat, this paper develops a multilevel model to investigate how individuals actually save. We find evidence that loss aversion bias exists in saving behavior as regards an individual's current level of income, and that evidence of this effect is also supported at the country level. We also find strong evidence that socio-demographic factors and cross-country differences influence individuals' saving behavior. We argue that behavioral approaches canand shouldbe used to understand saving behavior of individuals, and that this insight should be used towards the ongoing quest to improve future banking practice and financial reform, particularly in the aftermath of the 2008 financial crisis.
Policy Implications• Individuals' saving behavior responds more to declines than to increases in customers' current level of income. Therefore, policymakers should facilitate a framework in which losses become less salient, by prioritizing more the long-term benefits.• Findings show that loss aversion is smaller for those EU countries with a lower level of GNI per capita, such as Latvia, Hungary, Greece, Estonia, Portugal, Slovakia, and Cyprus. Incorporating evidence derived from EU countries into policy-making can help address the weaknesses associated with neoclassical approaches.• Individuals that are more educated, married and homeowners tend to save more than their counterparts. On the contrary, women, unemployed and individuals living in a large household tend to save less. Behavioral tools are especially recommended for individuals who are thought to be potentially 'vulnerable' customers.• EU countries such as Cyprus, Greece and Latvia exhibiting a smaller loss aversion are associated with negative saving rates.Financial policies which promote disclosure methods, such as targeting annual summaries, may be beneficial for customers in different EU countries to take their saving decisions.
“…Nevertheless, loss aversion is stronger in wealthier countries such as Luxembourg, the Netherlands, Austria, and Germany. These findings are consistent with Ashta (), who argues that loss aversion tends to be lower in poorer countries, since many individuals do not have the possibility of losing too much according to their limited liability. However, other scholars such as Foellmi et al () argue that countries with low levels of GDP per capita tend to suffer a greater loss aversion effect.…”
Section: Discussionsupporting
confidence: 91%
“…For example, De Neve et al () find that individual well‐being is more than twice as sensitive to economic downturns as compared to equivalent upswings using a measure of economic growth. While some scholars have suggested a negative correlation between different degrees of loss aversion and macroeconomic indicators such as GDP and consumption per capita (Foellmi et al, ), other studies argue exactly the opposite (Ashta, ). In countries with a low GDP per capita, where the poor have a limited liability since they do not have the possibility of losing anything, they may experience lower levels of loss aversion than other countries.Hypothesis 2: Countries with a lower level of GNI per capita are more likely to experience loss aversion in saving behavior.…”
Section: Loss Aversion In Saving Behavior: Evidence At Individual Andmentioning
Evidence is mounting that individuals do not always behave as strictly 'rational' customers of the banking sector as neoclassical models of economics would assume. Instead, scholars and policymakers are increasingly arguing that behavioral economics offers a more useful and realistic means of understanding customer behavior in the real economy. Drawing on data from the first European Central Bank harmonized household survey at the European level and Eurostat, this paper develops a multilevel model to investigate how individuals actually save. We find evidence that loss aversion bias exists in saving behavior as regards an individual's current level of income, and that evidence of this effect is also supported at the country level. We also find strong evidence that socio-demographic factors and cross-country differences influence individuals' saving behavior. We argue that behavioral approaches canand shouldbe used to understand saving behavior of individuals, and that this insight should be used towards the ongoing quest to improve future banking practice and financial reform, particularly in the aftermath of the 2008 financial crisis.
Policy Implications• Individuals' saving behavior responds more to declines than to increases in customers' current level of income. Therefore, policymakers should facilitate a framework in which losses become less salient, by prioritizing more the long-term benefits.• Findings show that loss aversion is smaller for those EU countries with a lower level of GNI per capita, such as Latvia, Hungary, Greece, Estonia, Portugal, Slovakia, and Cyprus. Incorporating evidence derived from EU countries into policy-making can help address the weaknesses associated with neoclassical approaches.• Individuals that are more educated, married and homeowners tend to save more than their counterparts. On the contrary, women, unemployed and individuals living in a large household tend to save less. Behavioral tools are especially recommended for individuals who are thought to be potentially 'vulnerable' customers.• EU countries such as Cyprus, Greece and Latvia exhibiting a smaller loss aversion are associated with negative saving rates.Financial policies which promote disclosure methods, such as targeting annual summaries, may be beneficial for customers in different EU countries to take their saving decisions.
“…The loss aversion concept has been used to explain government behavior: why do superpowers prefer to have continued risky military interventions in the periphery (Taliaferro, ) and why does protectionist legislation take place (Freund & Özden, ). Ashta () used it to explain why developed countries regulate to prevent mobile banking while underdeveloped countries seek to usher it in. His essential argument is that developed countries have too much to lose if the banking system collapses and therefore they are very wary and would need to be reassured that it works before taking the risk of disturbing the financial system, notably a banking system which works.…”
Minorities seeking majority legislations need to communicate the increased option set and limit the downside risk for the system. Social movements urging for change require institutional support including enabling legislation. Public policy support may require associating with similar movements or other stakeholders. Loss aversion, downside risk, crisis, and real options may be reasons for majorities to approve minority legislation.
“…To offset the increased detection, criminal syndicates have further lowered the values in an attempt to evade detection (Filipkowski, 2008;Tropina, 2014 are completed in real time, which could involve transactions crossing multiple jurisdictions and further complicates the law enforcement process (Filipkowski, 2008). Due to its speed of transaction, if the value is remitted and confirms to legal reporting limits, and does not generate 'red flags', the illicit funds could be received and withdrawn and the account could be closed before AML compliance officers, regulatory bodies and law enforcement has time to intervene (Ashta, 2017). In cases where the transaction is operated through an organised criminal network, the withdraw funds could be further passed onto smurfs to add furt her complexities to the money trail.…”
Purpose
The purpose of this paper is to explore the various characteristics of mobile money transactions and the threats they present to anti-money laundering (AML) and counter terrorist financing regimes.
Design/methodology/approach
A thorough literature review was conducted on mobile money transactions and the associated money-laundering and terrorist financing threats. Four key themes were identified in relations to the three stages of money laundering and effective law enforcement.
Findings
The findings indicate that as money laundering and terrorist financing transactions continue to gravitate towards the weaknesses in the financial system, mobile money provides yet another avenue for criminals to exploit. Risk factors associated with anonymity, elusiveness, rapidity and lack of oversights were all integral considerations in building an effective AML regime. The use of cash is considered a higher threat than mobile money prior to implementation of systems and controls.
Practical implications
This rapidly changing environment of how individuals manage their money during transactions is set to further explode globally, which poses new problems for regulators and governments alike. Unless there is a unified concentration to heighten global awareness, the imposing threat of mobile money is set to increase at a rapid rate if appropriate actions are not taken.
Originality/value
The findings from this study can be used to gain greater insights on mobile money transactions and raise further awareness of the ever-increasing threat to global financial integrity.
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