The mediating role of digital literacy between financial literacy and investment scam awareness

Abstract

This study analyses whether digital literacy mediates the relationship between financial literacy and investment scam awareness. Despite the rapid expansion of digital financial services, there remains limited knowledge of whether financial and digital literacy interact to shape resistance to online investment scams. A crosssectional survey was conducted among undergraduates who were selected through stratified random sampling in Sri Lanka. Financial literacy is measured through budgeting skills, financial attitude, financial product literacy and risk awareness. Partial least squares structural equation modelling (PLS-SEM) was applied to estimate the direct effects and mediating effects. Budgeting skills, product literacy and risk awareness enhance digital literacy, while financial attitude shows no meaningful effect. Digital literacy exhibits the strongest direct influence on investment scam awareness. Mediation analysis confirms that digital literacy transmits the effects of budgeting skills, product literacy and risk awareness to scam awareness, whereas financial attitude remains non-significant. The study conceptualizes digital literacy as a coping appraisal mechanism that enables individuals to operationalize financial knowledge in digital financial environments. Guided by Protection Motivation Theory, the study interprets financial literacy as supporting threat appraisal and digital literacy as supporting coping appraisal. The single institution, cross-sectional and self-reported design may restrict generalizability and causal inference. Future studies should use multi-site samples, longitudinal designs, fraud simulation experiments.