Exploring the Role of Behavioral Theories in Financial Inclusion

Author Details

Corresponding Author: Dr. Manish Panchasara,

Designation: Research Scholar,
Affiliation: Institute of Management Studies, DAVV, Khandwa Road, Indore,
Madhya Pradesh,
Email Address: f18manishp@iima.ac.in,

Co-Author: Dr. Vivek Sharma,

Designation: Associate Professor,
Affiliation: Institute of Management Studies, DAVV, Khandwa Road, Indore,
Madhya Pradesh,
Email Address: drvivek.ims@gmail.com,

Abstract

Several theories including the Theory of Planned Behaviour, Theory of Reasoned Action, the
Transtheoretical Model, the Model of Goal-Directed Behaviour and Prospect Theory are
evaluated for their applicability in FI. Further, the discussion of the strength and weaknesses
associated with these theories suggests unanimity in studying financial behavior, which is
essential to this study. Additionally, common thematic discourses across the theories, which may
support future research, are also discussed. Finally, the paper identifies the constructs across
different theories which contribute to the understanding of FI by promoting the better
understanding of psychological and social determinants of financial behavior.

Key Words

Financial Inclusion, Financial Behavior, Behavior change, Theory of Planned Behavior, Prospect
Theory

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Introduction

Financial Inclusion (FI) involves various relevant financial services that can be provided to
adults effectively. Fundamentally, FI begins by opening a deposit and a transaction account with
authorized financial institutions (like banks, microfinance institutions or more recently, mobile
money service providers) which not only protect the money, but also act as intermediaries for
making and receiving money. Consequently, additional services such as loans and insurance,
despite being linked to a bank account, can provide a better avenue for investments and business
opportunities as well as manage financial risk effectively.

In the context of overall development, no single definition for FI exists. However, a consensus is
developed among the advocates that FI usually ends the involuntary lack of access to FI. With
respect to this the definition given by the Centre for Financial Inclusion, a non-government
organization (NGO) founded by ACCION International, is worth noting:

“Full financial inclusion is a state in which all people who can use them have access to a
full suite of quality financial services, provided at affordable prices, in a convenient
manner, and with dignity for the clients. Financial services are delivered by a range of
providers, most of them private, and reach everyone who can use them, including
disabled, poor, rural, and other excluded populations.”

This definition covers two important aspects of FI: accessibility, and the cost that is a pre-
requisite for providing effective financial services. Furthermore, a similar approach is visible in
the definitions given by Sarma and Pais (2011), Ledgerwood and Gibson (2013), Thingalaya,
Moodithaya, & Shetty(2010), Claessens (2006), Rangarajan (2008) and by the Indian Planning
Commission (2009) wherein the significance of “accessibility” served as a common agenda for
researchers and implementing authorities across developing countries.

Figures on FI published by the Global Findex Report of World Bank (2018), are not
encouraging. Even after 79 per cent of adult Indians (+15 years) reportedly having a bank
account, 38.50 per cent of these accounts are inactive. Despite the digital revolution that has been
happening in the country, only 2 per cent of mobile money transfers have been reported. Against
the strict mandate of routing “all” government payments through bank accounts, only 8.10 per

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cent of accounts were reported to have received such payments. In the case of payments by the
private sector, this is even worse, where only 5.40% of payments are routed through accounts.
Further, while a large percentage of accounts should have resulted in excess savings and
borrowings, only 19.60 per cent reportedly made savings in financial institutions against the total
savings of 33.60 per cent. Similarly, out of the total borrowing reported of 42.40 per cent, 8.10
per cent borrowed from financial institutions. Over the past decade, the penetration of banking
services with respect to Banking outlets and Business Correspondences (BCs) has grown
manifold. While banking outlets in villages have grown from 33,378 (2010) to 50,805 (2018),
the growth of BCs in villages has been monumental too, growing from 34,174 (2010) to 515,317
(2018).

Further, the World Bank (2016) estimates the poverty profiles of the Indian population as not
being encouraging, given that 270 million Indians were poor in the year of publication of the
report. Amongst them, while 80 per cent of the poor live in villages and the total poverty rate
was 25 per cent, 27 per cent of the poor lived in villages with a population of less than 5000.
Moreover, the various assets held by the poor include 61% mobile, 29% TV, and 27% stove.
These figures largely represent the failure of the efforts aimed at implementing FI. In areas
where BCs are present in large numbers, the poverty rate is largely the maximum that is 27 per
cent. Additionally, credit disbursements of only 8.10% in such areas depict that banks do not
meet their social responsibilities. A very low proportion of mobile money transfers (2 per cent)
show that the implementing authorities have failed to establish it as an economical medium of
remittance.

Apparently higher investments made in creating suitable “access-points” and also creating (and
modifying) schemes such as direct benefit transfers and social insurance were not successful in
producing a desired impact in enduring financial behavior. Similarly, the major contribution of
FI is seen in terms of poverty reduction and maintaining social balance. Moreover, the figures of
poverty are also not encouraging thereby falsely endorsing the success of FI. Thus, there is the
urgency of shifting the onus of responsibility from the policy makers to beneficiary by targeting
the behavioral aspects that lead to voluntary approach. This transition of liability will serve to
solve two purposes: (a) it shall ensure the sustainability in account operation, and (b) more

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significantly, it will educate the beneficiaries in inculcating financial behavior that shall improve
overall quality of their life.

This assessment is also significant given its impact on financial behavior, which is the part of
human behavior that not only is confined to money management, but also leads to more informed
financial decision making. Therefore, targeting the financial behavior of an individual solves the
two important concerns of FI other than the primary concern of opening a bank account. First, it
encourages a person to become more financially conscious and second, it helps them to make
decisions which are more financially informed. As per Ajzen & Fishbein (1980), such behavior
comprises four elements: action, target, context and time savings. This paper assesses the
importance of the ‘action’ element that directly affects financial behavior.

The theoretical framework is essential in the field of financial participation because it comprises
a complex behavior based on a range of factors. However, no theoretical framework exists to
outline universally-acceptable research activities related to FI behavior. Katzell and Thompson
(1990) stated in connection with organizational psychology that multiple theoretical alternatives
could lead to the same behavioral consequences being explained in terms of different theories.
For those who attempt to build theory in the context of subject (in the present case it is FI
participation) it will be essential to re-examine previous findings or combine what has been
empirically supported (Conee & Feldman, 2004).Thus it becomes crucial for researchers to better
understand the ‘how and why’ of FI so as to promote its voluntary adoption amongst individuals.
For this to occur, an analysis of existing behavioral theories that are present in the literature of
psychology can be perused for evaluation.

Thus, the paper broadly aims to describe the theories/models that can help predict and explain
financial behavior pertaining to FI by evaluating the best-suited theories.

The Prospect Theory (PT)

In 1981, Tversky and Kahenman argued about the wider acceptance of the theory of expected
utility as a descriptive model of risk in rational decision-making and proposed an alternative
model, called the PT, which accounted for the significance of choice under risk. Choices
between risky prospects show several overarching effects which do not agree with the basic

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principles of the utility theory. In particular, people have underweighted those results which are
only likely to be compared with those obtained with certainty (Barberis, 2013). Resulting in the
“certainty effect”, this trend contributes to risk aversion occurring in choices involving certain
gains and losses. Theoretically, PT is based on four pillars: (1) the “reference dependence” which
forms the basis for deciding upon gains and losses and is measured in relative terms;
(2) higher sensitivity towards loss which is explained by “loss aversion”; (3) risk averseness
towards higher incremental gains (or losses) for smaller principal amounts and lower incremental
gains (or losses) for substantially higher principal amounts which is explained by “diminishing
sensitivity”; and, (4) “probability weighting” which explains the superiority of transformed
probabilities (weights assigned to decisions) over objective probability (see Tversky and
Kahneman, 1992).

The power of “loss aversion” is applied to motivate people for adopting more positive financial
behaviors. This can be exemplified through the case of Fryer Jr, Levitt, List & Sadoff, (2012)
who improved the performance of teachers by revoking incentives from them in case the students
did not perform well, which in turn resulted in improved math scores of the students. Similarly in
their experiment, Levitt, List, Neckermann, & Sadoff, (2016), applied “reference dependence” to
enhance the educational performance of primary and secondary students. Furthermore, Hossain,
& List, (2012) proved that incentives marked as “gains” or “losses” can increase the worker’s
productivity on an individual and team level.

Further, the applications of PT based on the aforementioned principles are used to explain the
savings and consumption behavior. Kőszegi and Rabin (2009) utilize the idea of PT for
explaining consumption, comparing both the existing and expected current levels with the future
consumption level. This attribute also contributes to the saving habits of an individual during a
period of income shocks. Furthermore, individuals incentivizing themselves with extra
consumption are better explained by sensitivity towards “news” targeted at future and current
consumption (Barberis, 2013). Mowen & Baker, (2009) found that those messages which are
worded more strongly and positively have a greater impact on the consumer than those
exhibiting a perception of loss. Alternatively, it can be inferred from this that consumers will
participate in or respond to marketing campaigns aimed at advantages as opposed to costs.

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Broader acceptance of the PT thus provides a strong basis for its applicability in FI. This can be
attributed to its potential advantage in evaluating the benefits obtained from participating in FI-
related activities. Moreover, the PT requires theoretical and comprehensive frameworks that help
analyze the cognitive processes involved in FI.

The Schema Theory

The notion of schema can be largely attributed to the work of Plato and Aristotle (Marshall,
1995). However, Kant (1929) has been regarded as the first to speak about schemas as
organizational constructs that mediate how we observe and decipher the world around us
(Johnson, 2013). “Cognitive biases” (Campbell, 1989), patterns of behavior (DiMaggio, 1997),
response based on pre-conceived ideas, and the system of organizing new information (Reynold
et al., 1981), are some forms of schema. Furthermore, schemas help absorb new knowledge, and
thus aid in a more meaningful understanding of the world (Nadkarni & Narayanan, 2007). More
prominently, in rapidly changing scenarios, the schema provides a medium for organizing
information for proactive decision- making (Georgeon & Ritter, 2012). Its indirect linkage is also
found in the development of knowledge through formation of cognitive structures, which in turn
are a result of accumulation and assimilation of information (Piaget, 1952).

The role of schema is also observed in the context of financial behavior (Beaton & Funk, 2008).
Kendzierski (1994) suggests that such behavior originates from a chain of self-schematic
decisions, which forms the basis for prospective behavioral decisions. Self-schematic decisions
include cognitive representations derived from individual-specific incidences (Markus, 1977).
Sheeran and Orbell (2000) proved that the schemas are objectively connected to behavior.
Finally, different modes of behavior for an individual including retaining, reducing, increasing or
abandoning are decided on the basis of schemas.

Although effective, the impact of schema is confined to reading processes (McVee, Dunsmore,
&Gavelek, 2005) and its applicability is restricted chiefly owing to its rigid nature (Schank&
Abelson, 1977). Similarly, research related to schemas is based on “bizarre texts” (Sadoski,
Paivio, & Goetz, 1991) which are “ambiguous” in nature (Carver, 1992) and activates default
schemas which restrict the flow of new information (Nassaji, 2002).

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The Transtheoretical Model (TTM)

The TTM utilizes stages of change to assimilate mechanisms into interventional theories. The
model has been derived from a comparative analysis of several significant psychotherapy
theories, primarily aimed at integrating a field which was segmented into more than three
hundred psychotherapy theories (Prochaska, 1979). Remarkably, those theories had a lot more to
say about “why we change rather than how we change”. They were primarily behavioral
theories, such as personality theories and psychopathology, rather than behavioral change
theories. Prochaska and DiClemente (1983) identified five change processes (or stages)
explaining the key ways in which people have changed their behavior. The five stages that are
involved in the TTM are pre-contemplation (no intension to take action within the period of six
months); contemplation (intends to take action in six months); action (change in behavior
expected in six months); maintenance (continuance of the behavior beyond the behavior of six
months); and, termination (cessation of behavior). Furthermore, the constructs that constituted
change processes were identified as “consciousness raising”, “contingency management”, and
“forming helping relationships” (Prochaska, DiClemente, & Norcross, 1992).

Furthermore, the experiments conducted on smokers and non-smokers reveal that the change
processes happening to an individual can be attributed to internal (voluntary efforts) and external
(need for professional assistance) factors. The purpose of the experiment was to evaluate the
basic behavior of and motivation behind the changing needs of individuals. This experiment
resulted in participants passing through different stages of change (DiClemente & Prochaska,
1982). This revealed that behavioral changes occur at different stages with changed processes
(Prochaska & DiClemente, 1983), thereby leading to the creation of the TTM.

Application of the TTM in financial behavior is found in the work of Bristow (1997). Later on
Kerkman (1998) extended the concept by applying the TTM in financial counseling.
Subsequently, several incidences were observed where researchers successfully applied concepts
of the TTM in the relevant areas of finance such as the application by Xiao, Newman, Prochaska,
Leon, & Bassett, (2004 ) in counseling for eliminating the debts of credit card, by Shockey and
Seiling (2004) in the financial literacy program for low income individuals and also in

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developing programs specific to education, and finally, by Loibl and Hira, (2007) to educate
women in making informed investments.

Compared to other behavioral theories, the TTM is more sophisticated (Armitage and Conner,
2000), although researchers have also raised noteworthy and vital issues such as (a) evaluating
the psychological behavior at every stage is quite difficult (b) assessing chronological change in
behavior is not possible (c) and differentiating between the roles that each stage plays in bringing
about behavioral change is difficult to assess. From the aforementioned issues raised, it can be
duly inferred that assessing psychological processes at every stage of financial behavior is
difficult as it involves data collection at every such stage (Cardinal, 1997). Additionally, the
TTM model discusses the termination of the behavior, but not its espousal. Therefore, the stages
of change, self-efficacy, decisional balance and the process of change, are the main constructs of
the TTM (Xiao, 2008).

The Theory of Reasoned Action (TRA)

Overdependence on behavioral predictive attitudes led Ajzen and Fishbein (1973) to speculate
that it was necessary to integrate other determinants such as attitudes, intentions and behaviors
into a conceptual framework leading to the TRA. Moreover, the TRA precisely differentiates the
role of attitude towards behavior and that towards the object. For instance, in trying to predict
behavior (screening for mammography), most theorists measured attitudes towards an object
(attitude towards disease). Fishbein showed that the attitude towards behavior serves as a better
determinant than that towards the targeted object (Fishbein and Ajzen, 1975).

The TRA claims that the “intention” of an individual is the key determinant of “behavior”
(Ajzen, 1991). Under the TRA, behavioral intent is expected to predict performance till action,
target, circumstances, time frame and/or specificity correspond to actual behavior (Sheppard,
Hartwick and Warshaw, 1988). Further, the constructs that has direct influence on “intention” are
“attitude” and “subjective norms”. While the subjective norm summarizes the social impact on
the perceptions of an individual such as beliefs that significant influencers wish them to engage
in a target behavior (Hagger et al., 2007). The attitude construct reflects the extent to which a
person assesses the existence of positivity or negativity in the concerned behavior (Ajzen, 1991).

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Sheppard et al. (1988) pointed out that the significance of modeling behavior in the development
of TRA (e.g., physical activity), is more significant than the results themselves (e.g., weight
reduction by 5 pounds).

However, the basic limitation of the TRA is its sole concentration on the pre-existence of
“rationality” among individuals, which often contributes to its misrepresentation (St. Lawrence
& Fortenberry, 2007). A fundamental premise on which the TRA rests is that individuals are
rational actors and the main drivers of their behavior are their ability to process information. In
reality though, that is not always the case.

The Model of Goal-Directed Behaviour (MGB)

Perugini and Bagozzi (2001) developed an advanced model of “purposive behavior” wherein the
“intent” is to achieve the outcome of behavior through “desire”, which in turn is influenced by
the classical constructs of the Theory of Planned Behaviour (TPB). This approach is described as
“theory deepening” by the authors. Alternatively, the MGB suggests that “desire” provides an
explicit incentive to intention as well as transforms motivation engraved into constructs of TPB
together with the new addition of “anticipated emotions”. These anticipated emotions are treated
as prior factual assessments wherein an individual imagines the consequences of goal
achievement and objective failure before deciding to act (Gleicher, Faith, Boninger, Strathman,
Hetts, and Ahn, 1995). Similarly, the existence of “past behavior” is also assumed to be a
prominent indicator of behavior in the MGB model.

The MGB has introduced three classes of individual aspects in explaining the purposive
behavior. Bagozzi and Dholakia (2006) have suggested that desire encourages motivation for the
intention to act and on similar lines, the antecedents of the TPB support decision-making via
desires leading to intentions (Bagozzi, 1992). Some philosophers also argue that desires have a
particular type of relationship with intentions, in that if individuals are aware and accept their
will to act, it motivates them to form an intention. Therefore, there are two types of desires as per
Perugini and Bagozzi (2001), depending on the situation and the individual. First, voluntary
desires serve as the backdrop for action to form a self-commitment to behave (Davis, 1984).
Here, the individual’s self-commitment for a particular behavior depends upon attitude,

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subjective norm and perceived behavioral control (Perugini and Bagozzi, 2001). Second,
“desire” motivates action that unleashes a vague desire pertaining to the basic needs of an
individual such as food and safety (Bagozzi, 1992).

However, in the MGB, the target behavior is essential for achieving the goal, thereby making
desire, related to the performance of a given behavior, as conducive to the achievement of a goal.
In philosophical literature, motivation is often referred to as the functioning of an “extrinsic
desire”, that is “a desire for something for its believed conduciveness to something else that one
desires” (Mele, 1995, p. 391). Desire thus represents the motivating state of mind, in which
assessments and reasons for acting are transformed into the motivation for doing so. This
motivation or desire is assumed to be the closest determinant of intentions.

Precursor for past behavior for the MGB has restricted its applicability in the areas where
adoption of behavior is the prime concern. This weakness is relieved by the TPB especially in
measuring the variables that may result in adoption of a new behavior. Alternatively, the
compulsion of “past behavior” in the MGB model can also be deduced, unlike that of the TPB.
Azjen (1991) also criticizes the usefulness of previous behavior in the model, against the
background that it provides no explanatory content. Although the TPB contains considerable
amount of information in measuring intention, but the impact of desire as an independent
construct on intention, needs to be further explored.

The Theory of Planned Behaviour (TPB)

The TPB as an updated model of the TRA focuses on social cognition and on the determinants of
behavioral choices of an individual (Ajzen, 1991). Accordingly, as per the contributing factors of
TPB which lead to intention as behavioral attitudes, the subjective norms and the perceived
behavioral control (Ajzen, 1991). Likewise, Ajzen and Fishbein (1980) suggested the
significance of behavioral intentions in influencing the patterns of behavior. Under the TRA, the
attitude reflects the extent to which a person makes an assessment about the existence of
positivity or negativity in the concerned behavior. Similarly, the subjective norm is referred to
role of social norms that effects an individual’s perception about an activity.

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The most important difference between both the theories exists in their respective approaches,
wherein TPB includes “perceived behavioral control” (Fishbein & Ajzen, 1975), which describes
anticipated obstacles reflecting the level of difficulty faced by an individual in performing the
behavior. Generally, a strong positive attitude, wide social recognition and exhibiting adequate
control in performing behavior, can contribute to stronger intentions towards the performing
behavior. Additionally, the TPB also assumes the direct impact of perceived behavioral control
on behavior (Ajzen, 1991). Further, application of the TPB has a wide area coverage i.e. taking
physical activity, alcohol cessation, consumer behavior, adopting technology, consumer
complaints, hunting etc. (Ajzen and Fishbein, 1980; Hrubes, Ajzen, and Daigle, 2001).

In the domain of financial sector utility, the TPB is utilized in areas such as financial counseling,
investors’ education and in retail (mortgage) loans (Xiao, 2008). Other than the above, the TPB
was also applied to British consumers for investigating investment-based decisions (East, 1993).
For instance, Bansal and Taylor (2002) applied it to investigate the switching behavior on the
sample of mortgage loan customers, and Xiao and Wu (2006) examined consumer behavioral
factors towards completion of a debt management plan, concluding that attitude and perceived
behavioral control play a significant role in influencing behavior. Further, Lim and Dubinsky
(2005) applied the theory to consumer behavior in e-commerce to evaluate the behavioral pattern
of online shopping. Similarly, a group of the researchers, applied the theory in assessing the
intentions of online shoppers (Shim, Easlick, Lotz and Warrington, 2001). Having analyzed the
sample of internet users, researchers inferred that the intention to use the internet for collection
of information, acted as a mediating variable between the TPB constructs and the endogenous
variable for intention towards online purchase. Fortin (2000) also applied the concept of the TPB
in explaining consumer behavior towards e-coupons. Behavioral intentions for e-coupons have
also been explained by Kang, Hahn, Fortin, Hyun, & Eom, (2006) wherein the author compared
both TRA and TPB and concluded that intention was better explained by TPB. Additionally,
financial behavior among the colleges students like credit and loans, savings and debt
management were explained by researchers (Shim, Xiao, Barber, & Lyons, 2007). Their findings
suggested that the constructs of TPB contributed well in explaining these intentions.

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The capacity of the TPB model in explaining the individual’s behavior can be inferred from the
functionality of the model (Azjen, 1991). Alternatively, it implies that its capability in processing
information acts as a mediator between ecological and psychological factors. Moreover, Ajzen
(1985) suggested that people would probably be able to provide themselves with the alternative
recourses as well as have the behavioral intention to perform it. The aforementioned points
evidently display that TPB has been applied to cover broad aspects of financial behavior.
However, no evidence is visible wherein TPB was targeted in knowing the intentions of
excluded that will lead them to open a bank account. Having a bank account is treated as a very
basic and preliminary step in inculcating any type of financial behavior and thus a fundamental
for implementation of FI.

The Social Cognitive Theory (SCT)

The SCT resides on two behavioral determinants: self-efficacy and outcome expectancies (both
situational and actionable) (Bandura, 1986). Self-efficacy beliefs have played an increasingly
important role in the SCT because they directly effect adaptation and change of behavior
(Schwarzer 1992). The SCT has shown to be an effective method for tackling complex problems,
and in deciding upon challenges. Furthermore, efficacy beliefs influence the choice behavior of
an individual which impacts personal development (Bandura, 2001). On the other hand,
situational outcome expectancy is based on factors that are external and have no bearing on
personal factors. Similarly, action outcome expectancy is determined by an individual’s own
actions (Armitage & Conner, 2000). Therefore, the SCT predicts behavior expressing perceived
control and exhibiting confidence in self-abilities of individuals.

In terms of predicting health-related behavior (Ellickson & Bell, 1990) and behavioral intentions
(Armitage & Conner, 2000), the SCT’s applicability is more apparent although self - efficacy
explains greater variance in behavioral prediction than the entire model, and its significant
behavioral determinant (Bandura, 1997). Self-efficacy has been shown to be critical in evaluating
the early stages of financial knowledge (Danes & Haberman, 2007), measuring the likelihood of
entrepreneurial activities being undertaken among individuals (Chen, Greene & Crick, 1998),
making and maintaining career-related choices for students (Sandler, 2000), and avoiding
financial distress (Kuhnen & Melzer, 2018).

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The Rubicon Model

Heckhausen and Gollwitzer (1987) postulated the Rubicon Model of action by distinguishing
between motivation and volition. The model provides a meaningful framework for volition
research, depicting how the various functions of volitional processes take place sequentially in a
behavior. The basis for this distinction was characterized by specific cognition to the phases of
motivation and volition. The goal formation process from emergence of numerous wants and
needs to clear the intention for their achievement is divided into various phases: (a) deliberating,
(b) planning, (c) acting, and (d) evaluation. Furthermore, deliberation and evaluation are part of
the motivational phases as they pertain to the feasibility and desirability of goals, whereas
planning and acting are part of the volitional phase as the achievement of goal is realized by self-
regulation. The Rubicon Model is based on the assumption that each phase involves a particular
cognitive mindset fulfilling its particular need.

Research based on the Rubicon Action Phase model has produced an array of empirical evidence
to support the pursuit of mental and behavioral resources. The aforementioned model is adeptly
used for demarcating distinct phases between stages and providing descriptions of the social
cognitive variables pertaining to each stage. It also highlights the differences between
initialization and chasing of goals without confounding the two. Thus, the existence of
commonality between the two concepts percolated for decades in the literature of motivation
psychology isolated “volition” (Gollwitzer, 2012). The model addresses this problem by tracing
the evolution of a motivational trend over time – from the formation of wishes and its selection,
to its engagement and ultimately, deactivating its objectives (goals).

Applications of the Rubicon Model applications are found in the foreign placement of managers
(Spiess & Wittmann, 1999) and in assessing the driver’s intention in evading collusion
(Diederichs, Brouwer, Klöden, Zahn, & Schmitz, 2018), but there are, in general, very few
empirical evidences (like above) that assess the effectiveness of this model.

The Action Control Theory

One of the fundamental theories on volition in modern times is explained by Kuhl (1984) in the
form of the Action Control Theory which focuses on self-control observed during the

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transformation process of motivation into action. Furthermore, it supports sustainable action until
goal achievement, barring any resistance until then. Resorting to pleasant and interesting
activities is a form of resistance to behaviors that can tempt individuals to undertake meaningless
tasks. For example, an athlete can be tempted to sacrifice important practice sessions in lieu of
spending leisure time with friends. To tackle this problem, Kuhl has suggested two forms of
action control: self-control and self-regulation. While, self-control refers to disassociation of
oneself from distracting thoughts and giving up the competition of behavioral tendencies, self-
regulation is related to the synchronized efforts of subsystems including motivation, affection
and cognition for strengthening intended behavior. Therefore, this theory clearly differentiates
issues related to motivation and volition. In the long run, self-regulation is considered to be much
more effective and useful, given it seeks to influence the motivational foundations of current
behavior to reduce temptations of behavioral change (Kuhl & Beckmann, 1994). Thus, intrinsic
motivation is impaired due to loss of freedom of self-determination (Deci & Ryan, 1985).

Kuhl further asserts that seven mediation control strategies allow the person to overcome
obstacles including the control related to emotion, motivation and coping failure, and two modes
that moderate their effects, namely action and state orientation (Gollwitzer, 1993). The
orientation of action urges to transform an intention into action, whereas state orientation
addresses past, present, and future cognitions. To measure action and control, Kuhl has
developed a scale based on sub-scales related to decision, performance and failures. Although,
Kuhl’s research provides an insight into processes that are relevant for volition, but wider
acceptability of these constructs is a persisting issue (Armitage & Conner, 2000).

Conclusions and Future Directions

The framework for the current research paper can be justified after reviewing and assessing
several theoretical frameworks on the basis of their appropriateness to examine FI participation
through the conduit of individual behavior. The efficacy of this research paper is mainly derived
from the theories within the domain of behavioral economics and motivation, and which are
multi-stage as well as goal oriented. Thus, in terms of utilizing FI for identifying individual
intentions, motivational and multi-stage models provide a complete ground for financial

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behavior. Furthermore, the failure of other models may be due to the presence of preliminary
requirements and assumptions which limit their usage for initiating behavior.

Despite motivational theories like the TPB (updated TRA) having proven to be empirically
suitable for financial behaviors, the prominence of SCT is required to be demonstrated.
Furthermore, direct linkage of self-efficacy with perceived control can have an indirect influence
on intention and behavior. Once people have formed a suitable intention, this theory can outline
the implementation of these intentions. Similarly, efficiency of multi-stage models in evaluating
financial behaviors has been demonstrated by the TTM, although models such as Rubicon and
Action Theory, which are prominent in distinguishing volition and motivation, should be
explored in the evaluation of key variables. Therefore, the paucity of multi-stage models due to
their longitudinal nature should be conceptualized on the basis of discrete stages.

Further, a number of research ideas can be drawn from the current research. First, there are no
incidences where psycho-social theories evaluate behavioral characteristics of FI. Since FI does
not require any pre-requisite of existing behaviors, measuring intentions will suffice the efforts in
establishing behaviors. Meanwhile, relatively few researchers utilized these theories in assessing
financial behaviors. With the application of theories such as SCT and Schema, the aim should be
to create knowledge by deducing behavioral factors. Moreover, psycho-social variables can be
explored by establishing the causal relationships by conducting experimental studies on such
variables. Also various types of interventions can be designed for evaluating the transitions of
peoples for multi-stage models.

Given distinct nature of these theories, the present study has identified several variables that can
be applied in the context of FI. First, the TPB as a whole is suited for the current project as it
provides conceptual and theoretical framework for evaluating intentions of individuals in FI
participation. Other than the constructs of TPB, variables such as desire, self-efficacy, and self-
regulation can be explored as exogenous variables. Finally, overlapping of constructs (including
self-efficacy and perceived behavioral control) can be assessed by integrating the model within
the study.

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This review sets out the criteria for the development of an overall FI behavior model, which not
only covers intention and behavioral action, but also combines it with the appreciation that
successful financial behavior can require a range of skills and practice levels. The basic
requirement for the suitable testing of such models, however, is the use of a future design.
Although difficult, it is interesting to follow people through intervention at several stages and
monitor how different psycho-social variables transform when individuals advance. Therefore,
incorporating the suitable psycho-social variables will correspond to reconceptualization of the
model, which will not only predict FI behavior, but will also encourage its transformation.

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