THE IMPACT OF COGNITIVE BIASES ON INVESTMENT DECISION-MAKING IN THE DIGITAL BANKING ERA

Abstract

Digital banking, financial technology (fintech), artificial intelligence (AI) and information and data are revolutionizing the global investment space. Digital Banking Platforms have also opened up financial markets more rapidly, making real-time transactions, automatic investment advice, personalised financial services and market information much easier to access. While these technological developments have enhanced the efficiency, transparency and financial inclusion, they have also ushered in fresh behavioural challenges that can affect investors in the decision-making process. Despite the increasing complexity of digital financial systems, cognitive biases still play a crucial role in financial decision-making, causing irrational judgments and poor financial outcomes. This article gives a critical review of the effect of cognitive biases in investment decisions while using digital banking. It uses the theoretical concepts of behavioural finance (Prospect Theory, heuristic decision making etc) to bring together the most recent research into the cognitive factors that influence thinking (overconfidence effect, anchoring effect, confirmation bias, herd psychology, availability effect, mental accounting and loss aversion). This article explores the potential of financial institutions, fintech firms, regulators and policymakers to tackle cognitive biases by means of investor education, ethical use of AI, transparent algorithmic governance, and behavioural interventions. It also identifies the new research topics such as explainable AI, personalised investment advisory systems, digital financial literacy, and behavioural analytics. The article combines behavioural finance, digital banking and financial innovation to offer practical guidance for building financially resilient, inclusive and behaviourally-informed digital financial systems.