Consumer financial behavior and financial capability

Abstract

Financial capability can be viewed as an improved version of financial literacy. Where financial literacy focuses on the financial knowledge of consumers, financial capability extends this construct to consider both consumers’ knowledge and behavior that can improve consumer financial wellbeing. However, the literature does not show a consistent definition and measurement scale of financial capability, which creates ambiguity about the concept. For the purpose of this chapter, we shortlist 95 articles published between 2007 to January 2022 in the Web of Science. Prior research has identified who is more (less) likely to be financially capable and what financial or life outcomes relate to better financial capability. In this systematic literature review, we propose specific research questions and recommend that future research on financial capability needs to consistently define this concept, show how interventions to improve financial capability lead to better outcomes, and make research on consumer financial capability global.