Vulnerability of individuals to economic crime and the role of financial literacy in its prevention: Evidence from India

Economic crime has been an area of concern for regulators and governments across countries, and billions of hard-earned money is siphoned off by fraudsters yearly. Financial service consumers' lives are made easier with the new technological developments in fintech. However, with the growing participation of individuals in formalised channels of banking and finance, through greater emphasis on financial inclusion, there is also a massive surge in the victimisation of individuals through investment-related scams and digital financial frauds. Using nationally representative data, the present study looks into the significant demographic and socioeconomic factors influencing the likelihood of individual victimisation through investment scams and digital frauds. It further explores how financial literacy helps reduce the odds of victimisation in both cases. The study finds that in case of fraudulent investment scheme victimisation, males belonging to the 40-59 age group who have studied graduation or post-graduation (including professionals) and belong to middle-income groups are more vulnerable to victimisation than other groups. Similarly, in the case of digital financial fraud victimisation, males below the age group of 60 years who have studied at least high school or more, belonging to middle-income groups and lower socioeconomic classes, have higher odds of victimisation than other groups. The study also finds that the odds of victimisation of individuals through digital fraud are higher than investment-related fraud. It further suggests that financial education significantly reduces the odds of victimisation in both types of economic crime. The study concludes with policy recommendations to governments and regulators based on the findings.