A Behavioral-Pattern Driven Framework for Research on Financial Consumer Protection

• Putting intermediaries' interests (i.e., profit-making) over those of financial consumers

• Business ethics training programs targeting different levels of employees in the financial service sector

• A mandatory oath like the Hippocratic Oath by medical doctors

• Developing and selling predatory or fraudulent financial products

• Regulatory requirements to prevent ‘incomplete sale’ (by providing appropriate information in an appropriate format, by offering a cooling-off period, by establishing an efficient and affordable conflict resolution mechanism, among others)

• Regulatory oversight of intermediaries

• Volume maximization strategy, to increase current profit at the cost of long-term financial loss

• Cyclical risk measurement and management practices

• Prudential regulations to institute a long-term view in the intermediaries' operation and help prevent pro-cyclical risk management practices

• Require sound risk measurement and management practices following accepted finance theories and empirical models in assessing the systematic and idiosyncratic risk factors; A BD·ML-based analytics to be considered

• Risk-rating of financial products to be conveyed to consumers(done by intermediary, validated by regulator, and released to consumers in a plain language; the BaFin case as an example)

• Under-utilization and under-investment in DPA technologies for front-office functions

• Under-utilization of DPA technologies for middle- or back-office functions

• Level the playing field in terms of data, market infrastructure, and other dimensions of competition among the intermediary types

• Regulatory sandbox to promote innovations among financial intermediaries

• Equip intermediaries with the BDAC in all three dimensions of personnel, infrastructure, and governance

• Organized financial crimes seriously affecting consumers' welfare (e.g., voice or messenger phishing, pharming, smishing, and hacking)

• Mechanism to coordinate the combat against crime organizations that are behind the financial frauds

• The SAR (Suspected Activity Report) requirement by CFPB

• Information dissemination on cases of financial frauds occurring in different countries, and on policy remedies employed

• Present time bias (i.e., too much consumption now but under-saving for the future)

• Under-prepared for retirement

• Well-targeted financial education (FE) programs with a clear objective, tailored to remedy this behavioral pattern for different consumer groups (differentiated by lifecycle stages, endowment levels, and other factors)

• Easy borrowing under platform-based lending, leading to over-borrowing

• Over-leverage caused by predatory lending products (e.g., subprime mortgage contracts)

• Well-targeted FE programs as above

• In-time, independent, and interactive counseling or advice programs (a GenAI-based interactive system to be considered)

• Sound and incremental expansion of financial inclusion for marginal borrowers

• Herd behavior caused by a strong and sustained asset price upturn

• Well-targeted FE programs as above, elaborating why “it is very hard to make money!”

• A GenAI-based investment consultation system (e.g., a robo-advisor operated by an independent entity)

• Information sharing (i.e., collecting and disseminating real-world cases on outcomes of the herd investment behavior and the fraudulent intermediaries)