“Crowdsourcing Financial Information to Change Spending Behavior” by Dr. Francesco D’Acunto
Dr. Francesco D’Acunto
Carroll School of Management
We document five effects of providing individuals with crowdsourced spending information about their peers (individuals with similar characteristics) through a FinTech app. First, users change their spending in the direction of their peers. Second, users’ reaction is asymmetric− those who significantly overspend reduce their spending by 9%, while those who significantly underspend increase their spending by only 1%. Third, users’ distance from their peers’ spending affects the reaction monotonically in both directions. Fourth, lower-income users react more than others and cut their spending in excess of 30%. The corresponding value for higher- income users is 5%. Fifth, discretionary spending drives the reaction in both directions and especially cash withdrawals, which are commonly used for incidental expenses and anonymous transactions. We argue Bayesian updating, peer pressure, or the fact that bad news looms larger than (equally-sized) good news cannot alone explain all these facts.