IT Meets Finance: Financial Decision Making in the Digital Era

Abstract

We discuss how information technology has been transforming consumers’ financial decision making through robo-advising, i.e. just-in-time scalable and portable advice delivered through FinTech applications. We start by describing the unique features that differentiate robo-advising from traditional IT applications to financial services and why such features represent transformational innovations in financial decision making. We then focus on four pioneering commercial applications in the US and abroad---innovations that empower retail investors with the ability to perform highly-technical investment strategies, to engage in complex tax-saving operations (tax-loss harvesting), to easily access the wisdom of the crowd based on the real-time analysis of big data, and to disintermediate financial services and level the playing field between ordinary households and expert financial intermediaries (peer-to-peer lending). We conclude by discussing the interdisciplinary open questions of robo-advising applications in strategy, management, business, and law.

Keywords: Consumer Finance, Household Economics, Beliefs, Investment, Debt Management, Taxes, Volatility, Wealth Accumulation, Wealth Inequality

JEL Classification: D12, D14, G41, G51, G53