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Automated Economic Welfare for Everyone? Examining Barriers to Adopting Robo-Advisors from the Perspective of Explainable Artificial Intelligence

Author

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  • Claas Digmayer

Abstract

Robo-advisors (RAs) support economic decisions for customers using artificial intelligence (AI). RAs are gaining increasing significance but lack market penetration. A significant issue is the perceived low transparency of such AI systems. This study examines the public’s demands on RAs with text-mining methods from the perspective of explainable artificial intelligence (XAI). The results reveal understandability and trustworthiness issues for each of the RA use phases (configuration, matching, and maintenance). In particular, five barriers emerge in RA if information needs remain unanswered: entry barrier, assessment barrier, evaluation barrier, continuation barrier and withdrawal barrier. The barriers can be mitigated by combining explanation, design and communication measures. The results are discussed regarding theoretical implications and practical recommendations for facilitating the adoption of RAs. JEL: D8 (D81, D83, D89), G1 (G11), G2 (G20, G23), G4 (G41), I2 (I24, I25), O3 (O31, O33)

Suggested Citation

  • Claas Digmayer, 2024. "Automated Economic Welfare for Everyone? Examining Barriers to Adopting Robo-Advisors from the Perspective of Explainable Artificial Intelligence," Journal of Interdisciplinary Economics, , vol. 36(2), pages 224-245, July.
    • Handle: RePEc:sae:jinter:v:36:y:2024:i:2:p:224-245
    DOI: 10.1177/02601079221130183
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Digital economic systems; adoption of robo-advisors; explainable artificial intelligence; use barriers;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G2 - Financial Economics - - Financial Institutions and Services
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G4 - Financial Economics - - Behavioral Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • I2 - Health, Education, and Welfare - - Education
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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