As the application of behavioral finance becomes more mainstream in Western nations, and agencies like the U.S. Consumer Financial Protection Bureau are working on behaviorally informed policymaking, behavioral finance has also captured the interest of emerging market countries, where policymakers are equally keen to apply some of its ideas and principles as they formulate key legislation for consumer financial protection.
Many of these countries are still relatively near the beginning of their journeys toward becoming market economies, says Rafe Mazer, a financial sector analyst at CGAP, an independent policy and research center housed within the World Bank in Washington, D.C., that’s dedicated to advancing financial access for the world’s poor. They have just begun to develop the proper institutions and correct policies for consumer financial protection, but behavioral finance can improve these laws and policies and make them more meaningful and effective as these markets evolve, he says.
“Most of the research on behavioral finance comes out of the [United States] and Europe, so there’s a real vacuum in places like Brazil, Mexico and China, where financial consumer protection is just as important as it is in the West,” Mazer says.
CGAP, together with global behavioral consultancy group Ideas42, recently hosted a workshop in Washington, D.C., that brought together leading behavioral finance researchers and policymakers from emerging market nations who are working in the area of consumer protection.
“We wanted to get together researchers on one side, and policymakers who are interested in the research on the other, to exchange ideas and thoughts and be able to discuss consumer behavioral traits across the world,” Mazer says.