THE INFLUENCE OF FINANCIAL LITERACY AND BEHAVIORAL BIASES ON BNPL USERS OF GENERATION Z

• Main Author: Ezechiel Jethjehian, Jeremy
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/77475
• Institution: Institut Teknologi Bandung

Over the past years, “Buy Now, Pay Later” (BNPL) has grown in size with almost 60 million users in 2022, consisting of mostly Generation Z customers. BNPL is a short-term financing service that allows customers to make a purchase and pay it later. In making any financial decision, Generation Z is influenced by their financial literacy. However, the Indonesian financial literacy level is relatively low at 38.03% and a recent study has shown that Generation Z has lower financial literacy when compared to other generations. Additionally, people's decision-making isn’t always done rationally but are affected by their behavioral biases, to which their impact on borrowing behavior have yet to be widely researched. Thus, this research aims to investigate the influence of financial literacy and five behavioral biases such as illusion of control, pain of paying, overconfidence bias, bandwagon effect, and present bias on Generation Z BNPL users’ borrowing behavior. The data for this study was collected through a questionnaire done by the researcher and analyzed using PLS-SEM. The result shows that financial literacy, overconfidence bias and illusion of control are influencing factors towards Generation Z BNPL users’ borrowing behavior. This implies that Generation Z’s choices in using BNPL aren’t always rational. Instead, they are influenced by their tendencies to be overconfident and unaware of how much control they truly possess.