How culture affects financial decision-making around the world
Cultural finance – that is, viewing money through the lens of culture – is a relatively young discipline. Traditionally, the mainstream view has been that consumers around the world all share similar financial goals – which has led to a one-size-fits-all approach. But different cultures view money in different ways, which has implications for international finance marketers.
History shapes financial attitudes
Different countries have different rates of saving. For example, household savings in China have traditionally been high relative to other countries. One reason for this is thought to be the country’s one-child policy which was in place until 2015. This policy meant households had less need to spend on children, but also reduced ability to rely on children in retirement – incentivising household saving.
Singapore and South Korea also have relatively high household savings rates. Heng-fu Zou at the China Economics and Management Academy in Beijing believes that countries which have been influenced by Confucianism and Taoism – which prize frugality – are culturally more disposed to saving money.
Germans are famed for their love of cash – certainly pre-pandemic – summed up by the German expression Geld Stinkt Nicht (cash doesn’t stink). Before Covid, German restaurant visits and groceries were paid in cash more than twice as often as the European average. Coupled to this is a broad dislike of credit cards and personal debt. This has been attributed to a collective folk memory of painful historical events such as the severe inflation of the Weimar Republic era, as well as a strong desire for privacy and a distrust of surveillance of any kind.
Symbolism and superstition matters
The meanings that different cultures attach to symbols or dates can impact financial decision-making. An often-quoted example in the West is Friday 13th – when stock market returns are supposed to be lower, due to investor paraskevidekatriaphobia (the word for fear of Friday 13th). In the Gregorian calendar, Friday 13th takes place in any month which begins on a Sunday, which happens between 1-3 times per year.
A parallel in East Asian cultures, especially China, is fear which surrounds the number 4 – tetraphobia – leading to some investors avoiding trades on the fourth day of the month. This is thought to be because the Chinese word for four – in different varieties of Chinese – is similar to the word for death. The same is also true in the Korean and Japanese languages.
In India, gold is especially symbolic of wealth and success, and plays a leading role in many traditional rituals. As a result, there is high demand for gold as an asset class, whether it’s traded as physical gold or a CFD (contract for difference) for the precious metal. This cultural affinity is similar in China, where buying “something gold” is a long-standing tradition at lunar new year.
Individualist and collectivist countries view money differently
One of the axes in Hofstede’s theory of cultural dimensions is individualism/collectivism. As a broad generalisation, Western societies tend to be more individualist whereas Eastern societies tend to be more collectivist (although the extent to which this is true will vary by country). This may affect attitudes to risk – for example, in collectivist societies where people can rely on family members and friends in times of financial need, risk appetite for investing may be higher.
One example of collectivism in action is the tanda, a money-saving method in Latin America and the Caribbean. It’s known by different names around the world (for example, hui in China, or stokvels in South Africa) but the underlying premise is the same – a group of people saves an agreed upon amount to a collective pool on a specific day, which could be payday or the first of the month. The system works in turns – on the first turn, one member of the group receives the money as a pay-out, and on the second, the next member, and so on – until all members have had their turn. No new money is created, but it’s a collective way for a group to save. Apps like Twine use fintech to bring an old concept up to date.
Religious influences are important
Religion can also shape attitudes towards money, a key example being Islamic finance. Islamic finance is based on the belief that money shouldn’t have value in itself – it is simply a mechanism to exchange products and services which do have value. Linked to this is the idea that you shouldn’t make money from money – which means that where possible, the concept of interest (either paying it or receiving it) should be avoided.
Islamic finance encourages the idea of partnership – i.e. that both profit and risk should be equitably shared – which amongst other things, requires banks to have a clear understanding of what is being financed. It also avoids investing in categories like alcohol, tobacco or gambling.
Islamic finance has evolved from a fairly niche service offered by a small number of banks in the Middle and Far East in the 1970s, to an influential part of the global financial landscape with about 1.6 billion participants worldwide. As well as being the preferred method of banking in orthodox Islamic countries, it’s also having a positive impact on smaller businesses, particularly in emerging economies, who might otherwise have limited access to finance. Some global finance brands have created sub-brands specifically to cater to Islamic finance – an example being HSBC’s Amanah.
Most Shari’ah-compliant credit cards are issued by financial institutions located in the Middle East, Persian Gulf, and Southeast Asia. However, since they are often processed through the MasterCard and Visa networks, they can be used worldwide wherever credit cards are accepted. Issuing creditors often have Muslim advisory panels to ensure that their products and services are compliant with Islamic law.
Every country is different
Every country has a different economic climate, which inevitably acts as a backdrop to financial decisions made by its citizens. Countries differ on factors like demographics, availability of credit, income levels and expectations, and uncertainty. In addition:
• The role of family in decision-making varies from culture to culture
• The relationship of individuals within their community can differ from one demographic group to another
• Attitudes towards financial institutions, including levels of trust, can vary by demographic group (including within countries)
• Religious or spiritual beliefs can affect how an individual manages their money and how they make financial decisions
Tips for international marketers
For finance marketers looking to expand internationally, it’s important to:
• Understand the cultural nuances of your target market so you can tailor your product and service accordingly – to capitalise on key opportunities and avoid costly mistakes
• Understand linguistic nuances – which means avoiding taking English language content and simply translating it but carrying out local keyword research instead, to understand how different markets understand and search for your product
• Understand how UX and online user journeys vary by market so you can ensure that your website reflects local audience intent
• Be clear about key cultural and financial dates and milestones in your target markets – which you can use as hooks for marketing activity
• Understand payment preferences, attitudes to risk, rates of saving, time horizons for investing, digital infrastructure, and the various dynamics which impact financial behaviour and decision-making in your target markets
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Oban’s LIMEs (Local In-Market Experts) can help you navigate the nuances of each market. To find out how, get in touch.
Az Ahmed | Marketing Manager
Oban International is the digital marketing agency specialising in international expansion. Our LIME (Local In-Market Expert) Network provides up to date cultural input and insights from over 80 markets around the world, helping clients realise the best marketing opportunities and avoid the costliest mistakes.