Cognitive Dimensions of Artificial Intelligence Literacy and Financial Decision-Making: Exploring the Mediating Role of Digital Self-Efficacy

Abstract

The present study examined the relationship between the cognitive dimensions of Artificial Intelligence (AI) literacy and financial decision-making and further investigated the mediating role of digital self-efficacy in this relationship. The study was significant because the increasing integration of AI into digital banking, investment platforms, financial information systems, and other technology-enabled financial services has created a growing need for individuals to possess not only financial knowledge but also the cognitive capabilities required to understand, apply, and critically evaluate AI-generated information. A quantitative, cross-sectional research design was adopted, and data were collected from 433 respondents residing in Punjab and Sindh, Pakistan. A structured, adopted questionnaire was used as the primary data collection instrument, incorporating measures of knowing and understanding AI, applying and using AI, evaluating AI, digital self-efficacy, and financial decision-making. Data were collected through an online Google Forms questionnaire that was distributed to eligible respondents through online networks, university contacts, professional contacts, social media platforms, and messaging channels. Descriptive statistics, reliability analysis, Pearson correlation, multiple regression, independent-samples t-test, one-way ANOVA, post-hoc analysis, and mediation analysis were conducted. The findings demonstrated that all three cognitive dimensions of AI literacy were positively associated with financial decision-making and significantly contributed to its prediction, with evaluating AI showing the strongest contribution. The findings further showed that cognitive AI literacy significantly predicted digital self-efficacy, while digital self-efficacy was positively associated with financial decision-making. The mediation findings indicated that digital self-efficacy partially mediated the relationships between the cognitive dimensions of AI literacy and financial decision-making. The study concluded that stronger AI-related cognitive capabilities, together with greater confidence in using digital technologies, may contribute to more informed and effective financial decision-making. The study therefore contributes to the emerging literature by integrating AI literacy, digital self-efficacy, and financial decision-making within a single framework and highlights the importance of developing AI and digital competencies for responsible financial engagement in an increasingly AI-enabled environment.