Analyzing the key determinants of propensity to credit card default among mobile banking app users in Sri Lanka

Abstract

Credit card default is a rapidly growing financial challenge in Sri Lanka that poses a risk to individuals, financial institutions, and the economy. Despite advancements in digital banking and access to real-time credit card information, default values continue to rise, indicating that economic explanations cannot fully account for credit card repayment behavior. Hence, this study focuses on exploring behavioral drivers for propensity to credit card default, guided by behavioral finance theories such as overconfidence bias and present bias, along with the Theory of Planned Behavior, and financial literacy. A quantitative survey was conducted among 100 credit card holders who use mobile banking applications to manage their credit cards in the Colombo district, and the respondents were selected using convenience sampling. The Multiple regression results indicate that present bias and subjective norms significantly increase the propensity to default on credit cards, while overconfidence bias, attitude towards behavior, perceived behavioral control, and financial literacy were not statistically significant predictors within the Sri Lankan context. Overall, short-term decision making and social influences are key drivers of propensity to credit card default, even when users have access to real–time financial information through mobile banking