Perceived Precautionary Savings Motives: Evidence from FinTech

63 Pages Posted: 6 Dec 2019 Last revised: 13 Feb 2020

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Thomas Rauter

University of Chicago - Booth School of Business

Christoph Scheuch

Vienna Graduate School of Finance (VGSF); WU (Vienna University of Economics and Business)

Michael Weber

University of Chicago - Finance

Multiple version iconThere are 3 versions of this paper

Date Written: December 12, 2019

Abstract

We study the spending response of first-time borrowers to an overdraft facility and elicit their preferences, beliefs, and motives through a FinTech application. Users increase their spending permanently, lower their savings rate, and reallocate spending from non-discretionary to discretionary goods. Interestingly, liquid users react more than others but do not tap into negative deposits. The credit line acts as a form of insurance. These results are not fully consistent with models of financial constraints, buffer stock models, or present-bias preferences. We label this channel perceived precautionary savings motives: Liquid users behave as if they faced strong precautionary savings motives even though no observables, including elicited preferences and beliefs, suggest they should.

Keywords: Household Finance, Consumption, Behavioral Finance

JEL Classification: D14, E21, E51, G21

Suggested Citation

D'Acunto, Francesco and Rauter, Thomas and Scheuch, Christoph and Weber, Michael, Perceived Precautionary Savings Motives: Evidence from FinTech (December 12, 2019). Chicago Booth Research Paper No. 19-26; Fama-Miller Working Paper; University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-140. Available at SSRN: https://ssrn.com/abstract=3499013 or http://dx.doi.org/10.2139/ssrn.3499013

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Thomas Rauter (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Christoph Scheuch

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, A-1020
Austria

HOME PAGE: http://christophscheuch.github.io/

WU (Vienna University of Economics and Business) ( email )

Welthandelsplatz 1
Vienna, A-1020
Austria

HOME PAGE: http://bach.wu.ac.at/d/research/ma/14198/

Michael Weber

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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