The Impact of Behavioural Biases in Personal Banking: A Study on Sri Lankan Customers
Article Sidebar
Main Article Content
Behavioral finance shows that bias influences personal finance decisions. This study focuses on Sri Lankan customers during the turbulent economic situation in the country and the biases that come with it. It samples all present biases, loss aversion, anchoring, mental accounting, overconfidence, herding, status quo bias, and a further, valence-biased, psychologically motivated bias. A structured questionnaire with demographic, financial literacy, and behavioral-based banking questions, and behavioral bias on a Likert scale, was distributed to 400 personal banking customers selected through stratified random sampling, with 323 valid responses processed. Descriptive statistics, chi-square, independent samples t, and logit regression were the analytical methods used. Status quo bias and mental accounting were the leading ones with the highest mean scores. Present bias, overconfidence, and psychology bias significantly predicted the respondents reporting that their savings were always increasing. Bivariate tests also revealed age, education, and income association with gains in savings perception. Age and market condition attention were positive predictors of perceived success in savings, while higher present bias and emotion-driven tendencies were negative predictors. The study also shows strong dependence on fixed deposits, considerable use of online banking, and ongoing reliance on personal judgement and family advice when making financial decisions. The research offers the results of an under researched South Asian environment and recommends the creation of banking products with a perception of bias, the establishment of more comprehensible communication with the consumers, the creation of specific financial literacy programs, and the increased inclusion of digitally reluctant and low-income clients in the banking strategies.
Downloads
References
Aboobucker, I., & Bao, Y. (2018). What obstruct customer acceptance of internet banking? Security and privacy, risk, trust and website usability and the role of moderators. The Journal of High Technology Management Research, 29(1), 109–123. https://doi.org/10.1016/j.hitech.2018.04.010
Adel, N. (2024). The Impact of Digital Literacy and Technology Adoption on Financial Inclusion in Africa, Asia, and Latin America. Heliyon, 10(24), e40951–e40951. https://doi.org/10.1016/j.heliyon.2024.e40951
Adielyani, D., & Mawardi, W. (2020). The Influence of Overconfidence, Herding Behavior, and Risk Tolerance on Stock Investment Decisions: The Empirical Study of Millennial Investors in Semarang City. Jurnal Maksipreneur: Manajemen, Koperasi, Dan Entrepreneurship, 10(1), 89. https://doi.org/10.30588/jmp.v10i1.691
Adkisson, R. V. (2008). Nudge: Improving Decisions About Health, Wealth and Happiness. The Social Science Journal, 45(4), 700–701. https://doi.org/10.1016/j.soscij.2008.09.003
Anuradha, P. A. N. S., Udayangani, T. T., & Jayarathna, G. S. (2024). Financial Planning and Self-control on Retirement Well- being through Financial Behaviour: Evidence from a Developing Country. Colombo Business Journal International Journal of Theory and Practice, 15(2), 28–53. https://doi.org/10.4038/cbj.v15i2.176
Badarinza, C., Balasubramaniam, V., & Ramadorai, T. (2019). The Household Finance Landscape in Emerging Economies. Annual Review of Financial Economics, 11(1), 109–129. https://doi.org/10.1146/annurev-financial-110118-123106
Banerjee, A., Claudia, M. A., & Puentes, E. (2025). Better strategies for saving more: Evidence from three interventions in Chile. Journal of Development Economics, 173, 103405. https://doi.org/10.1016/j.jdeveco.2024.103405
CBSL. (2021). Financial literacy survey Sri Lanka Key Survey Findings. https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/financial_literacy_servey_sri_lanka_2021_e.pdf
Dan, K. (2025). The role of mental accounting in risk-taking and spending: a meta-analysis of the house-money effect. Frontiers in Psychology, 16. https://doi.org/10.3389/fpsyg.2025.1549626
DCS. (2023). Department of Census and Statistics Ministry of Finance, Planning and Economic Development Household Survey on Impact of Economic Crisis -2023 Sri Lanka Final Report. https://www.statistics.gov.lk/Resource/en/OtherCensusandSurveys/SurveyReports/HHImpact_of_Economic_crisis_2023_Final_Report.pdf
Gargano, A., & Rossi, A. G. (2024). Goal Setting and Saving in the FinTech Era: Journal of Finance (John Wiley & Sons, Inc.). Journal of Finance (John Wiley & Sons, Inc.), 79(3), 1931–1976. https://doi.org/10.1111/jofi.13339
Gargouri, O. (2023). Digital banking services: customers’ pros and cons. a theorical literature review. Business Excellence and Management, 13(2), 5–13. https://doi.org/10.24818/beman/2023.13.2-01
Gethe, R. K., Bajaj, A., & Hulage, M. S. (2022). Behavioural finance: understanding impact of human behaviour towards financial decision making. International Journal of Economics and Accounting, 11(2), 182. https://doi.org/10.1504/ijea.2022.124149
Godefroid, Marie-E., Plattfaut, R., & Niehaves, B. (2022). How to measure the status quo bias? A review of current literature. Management Review Quarterly, 73. https://doi.org/10.1007/s11301-022-00283-8
Gomes, F., Haliassos, M., & Ramadorai, T. (2021). Household Finance. Journal of Economic Literature, 59(3), 919–1000. https://doi.org/10.1257/jel.20201461
Gonu, E., Agyei, P. M., Richard, O. K., & Asare-Larbi, M. (2023). Customer orientation, service quality and customer satisfaction interplay in the banking sector: An emerging market perspective. Cogent Business & Management, 10(1).
Hwang, I. D. (2024). Behavioral aspects of household portfolio choice: Effects of loss aversion on life insurance uptake and savings. International Review of Economics & Finance, 89, 1029–1053. https://doi.org/10.1016/j.iref.2023.07.027
Inghelbrecht, K., & Tedde, M. (2024). Overconfidence, financial literacy and excessive trading. Journal of Economic Behavior & Organization, 219, 152–195. https://doi.org/10.1016/j.jebo.2024.01.010
Jose, J., & Ghosh, N. (2025). Digital financial literacy and financial inclusion in the global south for a sustainable future: A scoping review. DECISION. https://doi.org/10.1007/s40622-025-00426-2
Kahneman, D., & Tversky, A. (1979). Prospect theory: an Analysis of Decision Under Risk. Econometrica, 47(2), 263–292. https://doi.org/10.2307/1914185
Kaustia, M., Conlin, A., & Luotonen, N. (2023). What drives stock market participation? The role of institutional, traditional, and behavioral factors. Journal of Banking & Finance, 148, 106743. https://doi.org/10.1016/j.jbankfin.2022.106743
Kurtaliqi, F., Miltgen, C. L., Viglia, G., & Pantin-Sohier, G. (2024). Using advanced mixed methods approaches: Combining PLS-SEM and qualitative studies. Journal of Business Research, 172, 114464–114464. https://doi.org/10.1016/j.jbusres.2023.114464
Laibson, D. (1997). Golden Eggs and Hyperbolic Discounting. The Quarterly Journal of Economics, 112(2), 443–478. https://doi.org/10.1162/003355397555253
Lee, S. R., Jung, E., Jin, S., Wang, Z. A., Brown, P., & Polotsky, E. (2024). The association between subjective and objective financial knowledge: Path analysis to savings behavior by age. Social Sciences & Humanities Open, 11, 101232–101232. https://doi.org/10.1016/j.ssaho.2024.101232
Madeira , C., Margaretic, P., Martínez, F., & Roje, P. (2022). Assessing the Quality of Self-Reported Financial Information . Journal of Survey Statistics and Methodology, 10(5), 1183–1210. https://doi.org/10.1093/jssam/smab059
Maji, S. K., & Prasad, S. (2024). Present bias and its influence on financial behaviours amongst Indians. IIM Ranchi Journal of Management Studies. https://doi.org/10.1108/irjms-02-2024-0009
Özşuca, E. A. (2024). Gender gap in digital financial inclusion across generations. Empirica. https://doi.org/10.1007/s10663-024-09641-z
Pompian, M. (2012). What Is Behavioral Finance? 3–21. https://doi.org/10.1002/9781119202400.ch1
Rau, D., & Bromiley, P. (2025). A review of cognitive biases in strategic decision making. Long Range Planning, 58(3), 102529. https://doi.org/10.1016/j.lrp.2025.102529
Ricciardi, V., & Simon, H. K. (2000). (PDF) What Is Behavioral Finance? ResearchGate. https://www.researchgate.net/publication/234163799_What_Is_Behavioral_Finance
Samarakoon, L. P. (2024). What broke the pearl of the Indian ocean? The causes of the Sri Lankan economic crisis and its policy implications. Journal of Financial Stability, 70, 101213. https://doi.org/10.1016/j.jfs.2023.101213
Samuelson, W., & Zeckhauser, R. (1988). Status Quo Bias in Decision Making. Journal of Risk and Uncertainty, 1(1), 7–59. https://doi.org/10.1007/bf00055564
Thaler, R. H. (1999). Mental Accounting Matters. Journal of Behavioral Decision Making, 12(3), 183–206. https://doi.org/10.1002/(SICI)1099-0771(199909)12:3%3C183::AID-BDM318%3E3.0.CO;2-F
Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and Biases. Science, 185(4157), 1124–1131.
Xin, Z., Xiao, B., Wang, L., & Xiao, H. (2024). Individuals’ Differences in Self-Assessment: The Relationship between Subjective and Objective Financial Literacy. Metacognition and Learning, 19(1), 365–379. https://doi.org/10.1007/s11409-024-09375-0
This work is licensed under a Creative Commons Attribution 4.0 International License.
All articles published in our journal are licensed under CC-BY 4.0, which permits authors to retain copyright of their work. This license allows for unrestricted use, sharing, and reproduction of the articles, provided that proper credit is given to the original authors and the source.