Trust by design: behavioural insights on financial literacy and fraud mitigation in the digital Euro framework

Financial inclusion is a key pillar of global economic well-being (Lusardi, 2019; Vo, 2025). Spreading financial knowledge throughout the population promotes monetary inclusion and supports more effective management of debt, credit cards, and personal finances (Lusardi et al., 2015; Hamid and Loke, 2021; Klapper; Lusardi, 2019; Shefrin and Nicols, 2014; Mieinskien et al., 2023). Greater understanding of financial products, risks, and opportunities can help prevent personal financial crises and promote overall economic stability (El Chaarani et al., 2024; Al-Okaily, 2025). Furthermore, financial literacy is particularly relevant in the digital age, where new financial tools emerge rapidly and require adequate understanding to be used effectively (Lusardi and Mitchell, 2014) (see Table 1).

Despite the proven benefits of greater financial literacy, the changing economic and technological landscape has introduced new challenges, including increased financial fraud (Daraojimba et al., 2023). These phenomena pose a growing threat not only to individuals who may suffer direct economic losses and security breaches, but also to the overall stability of the global economic system (Odeyemi et al., 2024). The introduction of new technologies, particularly in the digital age, has amplified these risks, as the widespread use of electronic payments and innovative financial instruments has made consumers increasingly vulnerable to a variety of scams. In fact, financial fraud can manifest itself in multiple forms, such as telephone scams, phishing, identity theft, financial market manipulation, and accounting fraud, among others (Ali and Mohd Zaharon, 2024). Often, fraudsters exploit technological and human vulnerabilities to induce victims to disclose sensitive information (Schidlow, 2025) or engage in fraudulent transactions (Ridho, 2024), with serious consequences not only for individual finances, but also for the reputation of institutions and consumer trust in the economic system (Rao et al., 2025).

The impact of financial fraud extends beyond monetary losses, as it can erode overall economic stability, diminish public trust in financial markets, and hinder economic growth. Therefore, prevention requires a holistic approach that combines financial education, advanced security technologies, and robust regulatory oversight.

Another crucial aspect in the financial literacy debate concerns the emergence of the digital Euro (Riganti and Weber, 2025). The European Central Bank (ECB) is currently in the process of developing and promoting a digital currency, called the digital Euro. This currency aims to facilitate payments and represents a significant advance in the financial system by offering various benefits for individuals, businesses, and financial institutions (Brunnermeier and Landau, 2023; Trichilli et al., 2025).

This instrument, designed to complement traditional cash and improve payment efficiency, is one of the most significant innovations in the European monetary system (ECB, 2021). However, the success of its implementation depends largely on the level of public understanding and acceptance. The introduction of a digital currency from the ECB (CBDC) is a significant step toward modernising the European monetary system (Petare et al., 2024). A digital Euro could offer greater strategic autonomy for Europe, reducing dependence on non-European payment service providers, and enhancing the competitiveness of the European payments landscape (Giovannini, 2023). Furthermore, it could improve the efficiency of cross-border payments and contribute to greater economic integration in the euro area (Schueffel, 2025).

The rapid digitalisation of financial services has generated both opportunities and vulnerabilities. On the one hand, it fosters inclusion and innovation (Akanfe et al., 2025; Graziano et al., 2025a); on the other hand, it increases exposure to fraud-related risks (Adwani, 2025; Oladinni and Odumuwagun, 2025). In this particular context, financial literacy assumes a pivotal role, functioning both as a bulwark against fraudulent activities (Usman et al., 2025) and as a catalyst for the integration of avant-garde instruments such as Central Bank Digital Currency.

The literature has comprehensively reported how a higher level of financial literacy reduces the probability of falling victim to fraud (He et al., 2025; Isaia et al., 2024), as well as the role of financial literacy in the spread of digital payment technologies and digital currencies (Prete, 2022; Palanisamy et al., 2025). However, these two areas of research have been treated separately until now, and there is currently a lack of studies that analyse the defensive and proactive functions of financial literacy together, integrating them into a unified framework.

This gap is particularly pertinent in the context of the digital Euro project, which is being developed by the ECB with the aim of strengthening payment efficiency, promoting inclusion, and enhancing the resilience of the European system. Its successful adoption will depend not only on the technical and regulatory design, but also on the level of understanding and acceptance by citizens.

To date, no study has empirically investigated the preventive and enabling functions of financial literacy within the same analytical framework.

Building on these considerations, this article addresses two main research questions.

Against this background, we expect financial literacy to play a dual role: reducing individuals' vulnerability to financial fraud and fostering more favourable perceptions of the digital Euro as a tool for enhancing cross-border payment efficiency. By empirically testing these relationships within a single analytical framework, this study contributes to the emerging literature on CBDCs and trust.

Jointly analysing these dimensions allows us to propose an integrated theoretical and empirical framework, the digital financial confidence tree, which conceptualises financial literacy as both a protective mechanism against risk and a driver of trust-based adoption of financial innovation.

The rest of the paper is structured as follows. Section 2 includes a detailed background of research, focussing on the relationship between financial literacy and financial fraud, as well as its role in promoting the acceptance and effective use of the digital Euro. Section 3 describes the methodology, the data collection process, the factors analysed, and the results. Section 4 presents the conclusions and discussion, while Section 5 discusses implications, limitations, and future research lines, complementing them through an integrative framework.

The definition of financial fraud is based on legal frameworks, which emphasise material misstatements, intentional deception, and the consequent economic losses, with varying judicial interpretations between jurisdictions (Ma and Wu, 2025).

Financial fraud and corruption practices pose significant challenges in various contexts, as they can cause considerable financial and social harm. Fraud involves deception and the illegal acquisition of advantages through various schemes and strategies, such as falsifying documents or manipulating financial information. Corruption, on the other hand, occurs when individuals in positions of power abuse their authority to gain personal benefits or favour third parties. These criminal activities take many forms, from the misappropriation of company funds to credit card fraud, often with devastating consequences for the victims involved.

The progressive digitalisation of society, along with the opportunities and benefits offered by new technologies, has also facilitated the growth of cyber-enabled fraud, primarily perpetrated online. In October 2023, the FATF (Financial Action Task Force) approved the final report of its project “Illicit Financial Flows from Cyber-Enabled Fraud”, which highlights various illicit activities, including romance scams, phishing, and other forms of online fraud.

Understanding the different types of fraud and corruption is crucial to developing prevention strategies and identifying effective remedies (Adejumo and Ogburie, 2025). Therefore, it is beneficial to analyse the existing scientific literature on the topic, examining the various types of financial fraud, their causes and consequences, as well as the strategies and tools employed to prevent and detect them (Gotelaere and Paoli, 2025; Takahashi et al., 2025).

The literature has shown that a higher level of financial literacy is associated with a lower probability of being a victim of financial fraud, as better informed individuals are better able to recognise fraudulent practices, adopt preventive behaviours, and make informed decisions (He et al., 2025). Individuals with sound financial education not only improve their ability to manage resources and plan for the future (Gomes, 2025), but also are better able to protect themselves from the risks associated with economic crime by reducing their exposure to the dangers of financial fraud (Awale et al., 2025).

Recent research further corroborates this relationship. Isaia et al. (2024) demonstrate that financial literacy significantly reduces individuals' exposure to online scams, although excessive confidence in one's financial abilities can paradoxically increase vulnerability. This finding highlights the behavioural dimension of fraud risk. Consistent with this behavioural perspective, Azizah et al. (2025) focus on students in the digital era and show that both financial knowledge and financial literacy have a positive and significant effect on individuals' attitudes towards avoiding digital financial fraud. Using a Structural Equation Modelling approach, the authors find that attitudes play a mediating role in reducing fraud risk, suggesting that financial literacy operates not only directly, but also indirectly through the formation of critical and vigilant behavioural attitudes. In a similar vein, Yu et al. (2022) have shown that, among middle-aged and elderly adults in China, both low financial literacy and higher risk tolerance are associated with greater victimisation by fraud. This suggests the importance of targeted educational programmes for vulnerable demographic groups. From a broader perspective, Baharudin et al. (2025) provide a systematic review of the determinants of financial literacy and its link to investment fraud, confirming that financial knowledge acts as a cognitive shield against fraudulent schemes. When considered as a whole, these studies serve to reinforce the notion that enhancing financial literacy is one of the most effective strategies to reduce individuals' exposure to financial crime within a variety of cultural and regulatory contexts. Recent evidence also frames financial literacy as a crucial component of fraud detection. Engels et al. (2021) show that financially literate individuals are more capable of recognising red flags, interpreting anomalous financial information, and identifying fraudulent behaviours at an early stage, thus reinforcing the dual role of literacy in both fraud prevention and detection. Furthermore, address the growing threat of financial fraud, exacerbated by the rise of digital transactions. They propose an approach based on improving public understanding of online payment methods to effectively counter invasive and dangerous attacks. This method uses online learning techniques to select the most appropriate classifier to analyse subsequent transactions. By updating fraud detection models in response to emerging schemes and behaviours, the approach ensures an effective response to aggressive fraudulent actions. Cucinelli and Soana (2023) explore whether people who respond “don't know” to questions about financial knowledge differ from those who provide incorrect answers. Using representative data on Italian adults, the authors identify sociodemographic and socioeconomic differences between these two groups. Their findings indicate that those who respond incorrectly are more likely to fall victim to financial fraud. Practical implications suggest tailoring educational and fraud prevention programmes to the specific characteristics of these vulnerable groups. Lastly, Cologgi (2023) assesses the impact of the new customer authentication requirements introduced by the revised Payment Services Directive (PSD2) on the security of remote payments in Italy. The study finds that the regulation has been effective in improving the security of remote payments, significantly reducing fraud in online transactions. Using a panel data model, the research estimates that authentication requirements mitigate the risk of fraud, confirming that exempt transactions remain relatively secure.

Recent international evidence further reinforces the protective role of financial literacy in diverse institutional settings. For instance, cross-country analyses of cyber-financial risks in Europe show that low literacy combined with limited digital skills is associated with more vulnerable risk profiles and higher exposure to online scams (Căciulescu et al., 2024). At the same time, policy-oriented reports emphasise that digital financial literacy is now a prerequisite for safely engaging with online finance and for reducing the probability of fraud victimisation in highly digitalised environments (OECD, 2025; UNDP, 2025). Taken together, these findings suggest that improving financial literacy is a key lever for fraud mitigation not only in Italy, but also across different cultural and regulatory contexts.

These considerations lead to the following hypothesis:

In recent years, the payment industry has experienced a rapid and revolutionary transformation (Wewege et al., 2020). Traditional payment methods, such as bank transfers and payment cards, have gained prominence alongside emerging tools such as digital currencies, cryptocurrencies, and stablecoins (Yadav et al., 2023; Yiapanas et al., 2024; Kvedaravičiūtė and Šapkauskienė, 2025). These innovative payment methods have grown in popularity due to their speed, affordability, security, and efficiency (Putrevu and Mertzanis, 2024).

However, it is essential to distinguish between different types of digital currencies. Cryptocurrencies, such as Bitcoin and Ethereum, operate in decentralised networks without central authority oversight (Tommerdahl, 2025). Stablecoins, while also privately issued, aim to maintain a stable value by being pegged to assets such as fiat currencies or commodities (Vatsa, 2025). On the contrary, CBDCs, such as the digital Euro, are government-backed digital currencies issued by central banks (Krause, 2025). These are designed to function as legal tender and maintain monetary stability while seamlessly integrating into the traditional financial system (Shah and Raj, 2025).

The ECB is currently developing the digital Euro as a publicly issued digital currency that will complement cash and respond to evolving payment trends (ECB, 2023). This initiative seeks to preserve the role of public money as a monetary anchor while ensuring strategic autonomy in European payments and fostering innovation, financial inclusion, and resilience within the financial system (Brunnermeier and Landau, 2023).

The preparation phase for the D€ began on 1 November 2023 and is expected to last 24 months. The goal is to align the development of the digital currency with the requirements of the Eurosystem and the needs of end users. The final decision on implementation will depend on the outcome of the legislative process and the deliberations of the ECB's Governing Council (ECB, 2023).

The introduction of the digital Euro raises critical questions about the future of money and its broader implications for society and the economy (Schueffel, 2025). In an era of increasing digitalisation of financial transactions, the digital Euro could provide an efficient alternative to physical cash by enabling peer-to-peer transactions and facilitating cross-border payments (Riganti and Weber, 2025).

However, scholars also stress the challenges associated with privacy, data security, and potential disruptions to the traditional banking sector (Brunnermeier and Landau, 2023).

Recent studies have examined the potential impact of the D€ on financial stability. For example, research conducted by the Bundesbank (2024) indicates that German households are inclined to adopt the digital Euro. However, this could pose risks to financial stability, which requires a carefully considered design to mitigate such risks. Furthermore, a report by Copenhagen Economics (2023) explores the impact of the D€ on financial stability and consumer welfare by evaluating different holding limits. The report suggests that an appropriately set holding limit could help balance the benefits of the digital currency against its potential risks (Copenhagen Economics, 2023).

The literature highlights the crucial role of financial literacy in the adoption and effective use of new forms of digital currency. A survey conducted by the European Union (2023) reveals that only 18% of European citizens possess a high level of financial literacy, while another 18% demonstrate a low level of financial understanding. This underscores the urgent need to improve financial competencies to ensure a smooth transition to the digital Euro (European Commission, 2023).

Existing literature underscores the vital role of financial literacy in shaping attitudes toward CBDCs, a finding reinforced by a 2023 European Commission survey revealing that only 18% of EU citizens feel sufficiently informed about the digital euro.

Recent empirical work has expanded our understanding of this relationship. Long et al. (2023) provide evidence to demonstrate that higher levels of financial literacy and self-efficacy substantially increase the likelihood of adopting electronic payment systems in Japan. This suggests that knowledge and confidence jointly drive digital payment behaviour. Complementary evidence further indicates that financial literacy facilitates the transition from cash-based transactions to digital payment solutions by strengthening users' confidence, trust, and perceived ability to manage digital financial tools (Sadok, 2025).

In a similar vein, Palanisamy et al. (2025) have demonstrated that financial literacy exerts a direct influence on the behavioural intention to use CBDCs, with trust functioning as a moderating variable that amplifies this impact. The findings of the study indicate that confidence in public institutions and understanding of the architecture of digital currencies are crucial in determining the acceptance of digital currencies.

At the macro level, Mertzanis et al. (2025) posit that nations exhibiting superior financial literacy demonstrate an accelerated progression in their integration of CBDC, thus implying that collective cognitive capacity may function as a pivotal element in the process of monetary innovation.

Recent empirical surveys provide further evidence on how financial literacy and communication strategies shape attitudes towards CBDCs. Using a population-representative experiment in the euro area, Georgarakos et al. (2025) show that targeted information on the key features of a potential digital Euro significantly increases consumers' willingness to adopt it, especially among those with higher baseline knowledge of digital payments. Similar discrete choice experiments in Austria confirm that consumers' adoption intentions are sensitive to design attributes such as privacy protection, offline usability and holding limits (Elsinger et al., 2025). In parallel, the ECB SPACE 2024 survey on payment attitudes documents the progressive diffusion of electronic payments across euro area countries, highlighting substantial cross-country differences in digital readiness that may interact with financial literacy levels when assessing CBDC projects (European Central Bank, 2024).

Choung et al. (2023) emphasises the close association between digital financial literacy and the utilisation and cognition of mobile financial services, proposing that within the ambit of the digital Euro, digital competencies become complementary to financial competencies.

As demonstrated in the research by the OECD (2025), there is now a growing body of evidence that digital financial literacy has become a prerequisite for the informed and safe use of digital payments.

Although financial literacy refers to the knowledge and skills needed to make informed decisions about money management, saving, and investment (Hamid and Loke, 2021; Anshika and Singla, 2022; Lusardi and Messy, 2023), digital literacy concerns the ability to navigate, evaluate, and use online tools securely (Reddy et al., 2023; Buchan et al., 2024; Jumabaeva, 2025). In the context of the digital Euro, both forms of literacy are mutually reinforcing: financial understanding enables informed economic choices, while digital skills ensure that individuals can safely use new financial technologies.

However, significant gaps in this area remain apparent among various age and income demographics within advanced economies. The findings indicate that enhancing financial and digital literacy can function as a dual policy lever, thereby reducing fraud exposure whilst promoting the inclusive adoption of new payment instruments, such as the digital Euro.

Additionally, the ECB has emphasised the importance of inclusivity in the design of the digital Euro, stating: “A digital Euro would be designed to be inclusive and accessible to all population groups, including those who currently have limited access to digital financial services”. This underscores the commitment to ensure that the digital Euro remains a widely accessible financial instrument, regardless of individual levels of digital or financial proficiency.

However, while accessibility ensures that all individuals can use the digital Euro, perceptions of its usefulness, particularly for improving cross-border payment efficiency, may still depend on financial literacy levels. More financially literate individuals may be better equipped to understand and appreciate the efficiency gains associated with a central bank digital currency.

Therefore, financial literacy operates as a trust building mechanism that bridges individual security concerns and institutional acceptance of innovation.

These considerations lead to the following hypothesis:

To address this complexity, the study adopts a survey-based empirical research design, complemented by documentary analysis. We have chosen to do a document-based analysis of existing use cases and institutional sources instead of using a purely quantitative or econometric approach, because the latter might reduce the issue's multidimensional nature. This strategy is especially appropriate for situations where the subject of development of study is in the process and where the information is scattered, bureaucratic and frequently subjective. The method chosen is based on the need to bring together information from policy reports, technical documents, and strategic frameworks created by central banks, international organisations, and private groups that are part of the digital Euro debate. Furthermore, using comparative tables helps us to see how different initiatives fit together, point out patterns that keep coming up, and find holes in design, governance, and communication strategies.

This method lets us rebuild an initial analytical framework to help us evaluate and design a future digital Euro system by focussing on interpretative depth instead of statistical generalisation. Comparative analysis is both a way to describe things and a way to point out important areas for future research and policy making.

Given these considerations, the relationships between financial literacy, financial fraud, and perceptions of digital Euro were examined using the chi-square test (χ²). This method was used to determine whether individuals with varying levels of financial literacy exhibit significant differences in their susceptibility to financial fraud and their perceptions of the digital Euro as a tool to improve cross-border payment efficiency within the euro area.

The chi-square test (χ²) is a statistical method used to assess whether there is a significant association between two categorical variables (McHugh, 2013). It compares the observed frequencies in a contingency table with the expected frequencies under the assumption that the variables are independent (Graziano et al., 2025b). The test assesses whether the differences between observed and expected values are large enough to suggest a statistically significant relationship between the variables (Agresti, 2018).

The key parameters of the chi-square test include the observed frequencies (O), the expected frequencies (E), the degrees of freedom (df), the significance level (α), the chi-square statistic (χ²), and the p-value. Degrees of freedom are calculated on the basis of the number of rows and columns in the contingency table, while the significance level is typically set at 0.05. A p-value below this threshold suggests a significant association between variables (McHugh, 2013; Agresti, 2018).

To address the complexity of the issue, this study takes an empirical approach, using surveys and statistical analysis. An online questionnaire was used to collect data in Italy using computer-assisted web interviewing (CAWI) between May and October 2024. The choice of a sample survey was motivated by the need to directly assess citizens' perceptions, attitudes, and knowledge on two critical aspects: vulnerability to fraud and acceptance of the digital Euro.

The questionnaire comprised 38 questions, which were divided into five main sections: (1) sociodemographic characteristics; (2) financial literacy “big five” questions; (3) payment preferences and habits; (4) perceptions of the digital Euro; and (5) direct experience of and awareness of fraud. The survey was conducted through social networks (Facebook, LinkedIn, Instagram, WhatsApp and Twitter), reaching approximately 1,000 individuals. Of these, 502 completed the questionnaire, representing a response rate of 50.2%.

The key variable of financial literacy was transformed into a Financial Literacy (FL) index, with values ranging from 0 to 5. One point was assigned for each correct answer to the five fundamental questions. This index is widely used in the international literature and ensures reliable and robust comparisons (Klapper and Lusardi, 2020; Klapper et al., 2015).

The research hypotheses were tested using chi-square analysis, a statistical technique suitable for assessing the association between categorical variables. The analysis was carried out using Stata software, adopting a significance level of α = 0.05, the standard p-value serving as a criterion for accepting or rejecting the hypotheses. Specifically, p-values below 0.05 were considered statistically significant, while p-values below 0.01 indicated strong significance.

The analysis included binary variables, such as correct or incorrect answers to financial literacy questions, as well as categorical variables derived from Likert scales. Combining these measures strengthened the robustness of the results, preventing unnecessary simplification, and providing a more accurate representation of the observed relationships.

The empirical strength lies in its joint analysis of fraud prevention and CBDC adoption, two areas that have previously been considered separately in the literature. This is complemented by the use of a consolidated index, the “Big Five”, which enables a consistent and reliable measurement of financial literacy. Furthermore, applying the chi-squared statistical test enables us to highlight significant empirical associations between financial literacy, vulnerability to fraud, and perception of the digital Euro. The complete questionnaire results are provided in the appendix, while the key findings are presented and discussed below.

The first section collects information on the demographic and socioeconomic characteristics of the respondents, including age, gender, civil status, education level, occupation, geographic area of residence and income. The participants were predominantly between 26 and 45 years (55%), with a balanced gender distribution (49.2% male and 50.6% female). Most reported being single (55%) and residing in central or southern Italy (78%). Most of the respondents were employed (57.8%) and had at least a master's degree (59.2%), indicating a relatively well-educated sample. Income levels varied, with one third earning between €20,000 and €30,000 annually, while 34.8% reported earnings above €30,000.

As the survey was administered online, the sample may be affected by self-selection bias and by the digital divide. Individuals with higher education levels and greater digital familiarity are more likely to participate in web-based surveys, potentially under-representing older or less digitally connected populations. This characteristic is acknowledged upfront in order to provide a transparent assessment of the representativeness of the data.

The second section focusses on the level of financial literacy, assessed using the Big Five Questions developed by Klapper and Lusardi (2020). These five questions evaluate fundamental financial concepts, including simple and compound interest, loan funds, inflation rate, and the risk-return relationship. In the Appendix, the correct answer is highlighted in bold, providing a clear reference to assess financial knowledge. As can be seen from the results, most of the people who answered the question correctly understood how simple interest works and the effect of inflation on purchasing power. For example, 73% correctly identified the interest earned after one year, and 69% knew that inflation reduces buying power. However, only 58% correctly answered the question of compound interest over five years, suggesting that this area was less well understood. People also have different levels of knowledge on the importance of diversification: 44% correctly stated that investing in a variety of stocks lowers risk, while 35% incorrectly believed that a single stock has a better chance of growth. Most people (70%) correctly understood the connection between risk and return, agreeing that investments with fewer risks usually have lower returns. However, a significant proportion of the respondents incorrectly answered or said they were unsure, indicating that there is still room for improvement in basic financial literacy.

Drawing on validated items from Graziano et al. (2023), the third section focusses on payment preferences, with seven questions designed to investigate respondents' use and attitudes toward digital and innovative payment instruments, exploring both their prevalence and perceived benefits. As the results show, respondents tend to have a generally positive perception of digital payments. On average, these were considered to be fast and efficient (score: 4.46), easy to use (score: 4.04), and relatively secure (score: 3.81). Furthermore, when asked about the most interesting innovations, mobile payments and wallets were the most frequently mentioned (39%), followed by real-time payments (28%) and payments using smart objects (22%). The main factors influencing respondents' preference for digital payments over cash are ease of use (37%) and speed (35%), with security playing a secondary role (21%). The perceived importance of cash in today's society is moderate (an average score of 2.85 out of 5), with more than half of respondents (51%) believing that digital payments will eventually replace cash. However, a significant proportion (35%) remain sceptical.

Aligned with Tronnier and Kakkar (2021), the fourth section focusses on the digital Euro, with nine questions designed to understand whether respondents had ever heard of this instrument and, after a brief introductory explanation, to investigate their perceptions with respect to the usefulness, security, and efficiency of the digital Euro in cross-border payments. Although the results highlight a moderate level of awareness and interest in the digital Euro, perceptions of its usefulness remain cautious. Although 58% of the respondents have encountered the concept, their perceptions of its potential to simplify financial life (mean = 3.16) and influence saving and investment behaviour (mean = 2.88) are somewhat cautious. However, there is a relatively strong interest in participating in financial education programmes on this topic (mean = 3.49). Concerns about financial privacy persist, with 35% believing that it would be partially affected and 20% seeing a clear risk. Concerns about the risk of losing access to funds due to technical problems are also widespread (mean = 3.40). The broader systemic benefits are perceived more positively. Respondents see the potential to improve cross-border payments within the euro zone (mean = 3.56), tackle tax evasion (68% at least partially agree), and promote financial inclusion (60% at least partially agree). These insights suggest that clear communication and educational efforts will be essential in fostering trust and acceptance of the digital Euro.

Finally, based on items adapted from Shree et al. (2021), Brands and Van Doorn (2022), and Engle et al. (2025), the last section addresses the topic of financial fraud, including nine questions aimed at understanding the frequency and types of fraud experienced, as well as awareness and preventive behaviours adopted to mitigate the risk. The findings suggest that people are relatively concerned about financial fraud and respondents express moderate to strong concern about becoming victims (mean = 3.56). Almost half (49%) believe that the increasing popularity of digital payments and online banking raises the risk of fraud, although 24% think that it reduces it. Although confidence in banking security systems is moderate (mean = 3.48), many respondents report receiving suspicious communications regarding their financial information (mean = 3.03). The experience of fraud remains limited (mean = 1.54), as is the exposure to counterfeit money (mean = 2.14). Interestingly, 74% of the respondents said that their bank has never asked for account or card details, suggesting some awareness of phishing scams. Furthermore, awareness of personal security practices, such as the use of complex passwords or two-factor authentication, is relatively strong (mean = 3.57). There is also a high perceived value in financial literacy initiatives as a preventive measure (mean = 4.10), which reinforces the link between education and resilience to fraud.

This section discusses the results of the chi-square test (χ²). As mentioned above, the chi-square test (χ²) is a widely used statistical method to determine whether there is a significant relationship between two categorical variables (McHugh, 2013). This test operates by comparing the observed frequencies in a contingency table with the expected frequencies, assuming that the variables are independent. The magnitude of the differences between the observed and expected values is then evaluated to determine if they are significant enough to reject the null hypothesis of independence (Agresti, 2018).

The key elements of the chi-square test, as discussed, include the observed frequencies (O), the expected frequencies (E), the degrees of freedom (df), the significance level (α), the chi-square statistic (χ²), and the p-value. The degrees of freedom in a chi-square test are calculated on the structure of the contingency table. Specifically, they are determined using the following formula:

This formula is used in contingency tables where rows represent one categorical variable and columns represent another.

Subtracting one from each dimension accounts for the fact that the values in the table must sum to a total, reducing the number of truly independent values (Chernoff, 1954).

The test result is guided by the significance level, often set at 0.05, with a p-value below this threshold indicating a statistically significant association between the variables (McHugh, 2013; Agresti, 2018).

This test is particularly valuable for analysing categorical data and assessing patterns that may not be immediately apparent, making it an essential component of exploratory data analysis (Rana and Singhal, 2015). The model was estimated to identify factors that influence financial literacy, exposure to financial fraud, and perceptions of the digital Euro. To this end, only a subset of the questionnaire was included in the analysis. The chi-square test (χ²) was performed using the Stata software package.

For the analysis, two different types of variables were considered: items rated on a Likert scale and those used to calculate the Financial Literacy Index. Although the Likert scale was applied to some questionnaire items, the Financial Literacy Index was constructed following established methodologies in the literature. Specifically, the standard approach involved including the widely recognised “big five” questions, which assess the fundamental economic and financial concepts encountered in daily life. These questions were not rated on a Likert scale but instead had one correct answer for each, allowing a binary scoring method (1 for correct answers and 0 for incorrect answers).

This scoring method was used to calculate the FL index, which ranged from 0 (no correct answers) to 5 (all correct answers), as described in previous studies (see, e.g. Graziano et al., 2023, 2025b; Klapper et al., 2015; Petroccione et al., 2025). This approach ensured a consistent and robust measurement of financial literacy in conjunction with other variables.

Table 1 shows the variables included in the model in their original dimension, in the questionnaire, and how they are expressed.

The analysis was performed using STATA, a StataCorp-developed statistical software, widely used for data manipulation, statistical analysis, visualisation, and automated reporting generation.

The results of the first hypothesis, as can be seen in Figure 1, show that the test yielded a chi-square value of 47.1063 with 20 degrees of freedom and a probability value (Pr = 0.001), which is significantly lower than the traditional significance level of 0.05. This suggests a statistically significant relationship between the two variables.

Therefore, the results of the test demonstrate a strong association between financial literacy and the probability of falling victim to financial fraud. These results are not only statistically significant but also substantively meaningful, as they indicate that financial literacy operates as a behavioural mechanism that shapes risk awareness and reduces individuals' vulnerability to financial fraud. Specifically, people with higher levels of financial literacy are significantly less likely to become victims of fraud. This can be attributed to their increased awareness of potential risks, as well as their ability to adopt preventive behaviours and recognise warning signs associated with fraudulent schemes.

The findings confirm the hypothesis that a higher level of financial literacy serves as a protective factor against financial fraud. Financially literate individuals are better equipped to assess the credibility of financial offers, identify suspicious activities, and make informed decisions that minimise their exposure to fraudulent practices.

This result underscores the critical role of financial literacy in improving individual financial security. In addition, it emphasises the importance of implementing financial education programmes as part of larger fraud prevention strategies. Such initiatives could empower people, particularly those in vulnerable groups, to better protect themselves from financial exploitation and navigate the increasingly complex financial landscape with greater confidence.

The results of the second hypothesis, as can be seen in Figure 2, show that the test yielded a chi-square value of 530.1624 with 20 degrees of freedom and a probability value (Pr = 0.000), which is significantly lower than the traditional significance level of 0.05. This suggests a statistically significant relationship between the two variables. Thus, the test results demonstrate a strong association between financial literacy and individuals' perceptions of the digital Euro's utility as a tool for enhancing the efficiency of cross-border payments within the euro area. Specifically, people with higher levels of financial literacy are more likely to recognise the potential of the digital Euro to streamline cross-border transactions, reduce costs, and increase the speed of payments in the Euro area.

This finding aligns with the theoretical framework, suggesting that financial literacy improves the ability to understand and evaluate innovative financial tools and systems. It also highlights the importance of financial education in fostering positive attitudes toward digital financial solutions, particularly in contexts where perceived benefits are linked to complex concepts such as cross-border payment efficiency.

Financial literacy can contribute to improving individual and family well-being and ensure greater security when making strategic decisions for one's future. Furthermore, a national strategy to improve financial literacy, especially aimed at vulnerable populations such as women, young people, and immigrants, can promote economic growth, contribute to the achievement of important goals of sustainable development, and reduce economic, social, and racial inequalities.

Empirically, this article makes a significant contribution to the existing literature by demonstrating, through chi-square analysis, a statistically significant dual relationship, protective and enabling, between financial literacy, fraud vulnerability, and CBDC perceptions.

However, it should be noted that even people with a good level of financial literacy can make poor decisions regarding investments and savings. This is why policies that support financial knowledge must be continuous and adaptable.

The results highlight the crucial role of financial education in protecting personal finances, showing that people with higher financial literacy are better equipped to identify and avoid risky situations.

Furthermore, a strong correlation was found between people's views of the digital Euro as a tool to increase the effectiveness of cross-border payments, particularly within the eurozone, and their level of financial literacy.

The survey's findings support the idea that perceptions of new financial technologies, like the digital Euro, are greatly influenced by knowledge of financial principles. A significant percentage of the respondents were particularly interested in the potential advantages of digital payments, such as its ability to streamline transactions, improve productivity, and promote financial inclusion. However, concerns about privacy and the possibility of financial fraud are still common, underscoring the need for detailed instruction and strong security protocols to foster confidence in digital financial products.

The existing literature has extensively explored the connection between financial literacy and fraud prevention (Engels et al., 2021; He et al., 2025; Isaia et al., 2024; Rey-Ares et al., 2024). Additionally, it has examined its role in the adoption of modern financial technologies, such as digital payments and CBDCs, including the digital Euro (Long et al., 2023; Prete, 2022; European Commission, 2023; Shehadeh et al., 2025; Palanisamy et al., 2025). However, a significant gap in previous research lies in the lack of studies that systematically combine these two critical aspects: financial literacy as a protective factor against fraud and as an enabler for the adoption of innovations such as the digital Euro.

The results show that people who are better at handling money are less likely to be scammed. This finding is consistent with the conclusions of He et al. (2025) and Isaia et al. (2024), who underscored the importance of financial literacy in protecting against online scams. At the same time, there is a positive correlation between financial literacy and the perception of the digital Euro as an efficient tool for cross-border payments. This is consistent with studies that have documented the link between financial literacy and openness to digital payment solutions (Prete, 2022; Palanisamy et al., 2025).

Importantly, these findings suggest that fraud prevention and innovation adoption are not independent processes, but rather interconnected dynamics shaped by the level of financial literacy.

Building on this evidence, the present study makes an original contribution to the literature by jointly examining the impact of financial literacy on vulnerability to financial fraud and the perception of the digital Euro as a tool to improve the efficiency of cross-border payments in the eurozone. By providing empirical support for this dual relationship, the study demonstrates that financial literacy operates simultaneously as a “shield” against fraud-related risks and as a “driver” of trust and acceptance of monetary innovation. This integrated perspective is particularly relevant for both policy and educational strategies, as initiatives aimed at strengthening financial literacy may simultaneously enhance consumer protection and foster the adoption of CBDCs, thereby supporting monetary integration.

In light of these results and drawing on prior research (Fan et al., 2025; Thrassou et al., 2024; Galati et al., 2021; Vrontis et al., 2021; Vrontis and Christofi, 2021), we propose the following conceptual framework: the digital financial confidence tree (Figure 3). The framework synthesises the empirical findings by visually representing financial literacy as the foundational root from which both fraud resilience and trust in CBDCs emerge.

Although the empirical analysis is grounded in the Italian context, the proposed framework has broader relevance for other euro area countries currently engaged in the debate on the design and implementation of a digital Euro. In systems where cash usage is declining and electronic payments are widespread, financial literacy may be particularly important to reconcile concerns about fraud, privacy and bank disintermediation with the potential efficiency gains of CBDCs. Conversely, in countries with lower digital readiness or weaker consumer protection regimes, literacy initiatives may need to be combined with investments in infrastructure and supervisory capacity before similar trust-building dynamics can emerge.

This model represents the key role of financial literacy in fostering trust and informed adoption of digital financial innovations in an integrated way (Yiapanas et al., 2024). The model summarises the main dynamics that emerged from the study, emphasising literacy's protective function with regard to risks and its enabling role with respect to emerging technologies, such as the digital Euro.

The main limitations of this study are size and specificity, which are important factors to consider.

Data were obtained in Italy, limiting its applicability to other cultural and socioeconomic contexts. Furthermore, the measure of financial competence was based on self-assessment questionnaires, which could be affected by cognitive bias or social desirability, resulting in inaccurate responses. Another limitation is the time dimension: the data obtained only provide a snapshot of the study period, without accounting for changes in financial literacy or public perceptions over time. Finally, the study did not thoroughly investigate other factors that can influence perception of fraud risk or adoption of digital tools, such as access to technology or specific local regulations that can vary by country or region.

Beyond these sampling and measurement issues, an important limitation concerns external validity. The study focuses on Italy, a country characterised by specific institutional features, payment habits and trust in public authorities. Cultural attitudes towards cash, risk and privacy, together with differences in regulatory enforcement and fraud reporting, may lead to different patterns of association between financial literacy, fraud exposure and CBDC perceptions in other jurisdictions. As a result, our findings should be interpreted as context-dependent evidence rather than universally generalisable relationships.

A further implication is that the proposed “digital financial confidence tree” should be seen as a transferable but not fully general framework. Its core mechanisms, financial literacy as both a shield against fraud and a driver of innovation – may apply beyond Italy, but their relative strength is likely to depend on cross-country differences in digital infrastructure, supervisory regimes and levels of institutional trust. Future research could therefore test and adapt the framework in other euro area and non-euro area countries, explicitly modelling institutional and cultural moderators.

Two possible biases must be considered in addition to the limitations already recognised in terms of sample size and specificity. First, there is the issue of the digital divide: the survey was distributed online, which could have excluded less connected segments of the population, such as the elderly, rural residents and low-income citizens. These groups are often the most vulnerable to digital fraud. Second, there is a risk of self-selection bias: voluntary participation through social media may have attracted people who are, on average, younger, more educated, and more digitally competent. This limits the wider applicability of the results. Future studies should therefore include more representative samples and make cross-country comparisons.

The policy implications fall into three closely related categories. Firstly, targeted financial education programmes must be developed for young people, the elderly, and vulnerable groups. These programmes should include specific training in digital security and fraud recognition. Improving the financial literacy of these groups would significantly reduce the risks associated with managing economic resources and encourage the more informed use of digital tools.

At the same time, effective communication strategies on the digital Euro are needed. Campaigns promoted by the ECB and national central banks could alleviate concerns about privacy and security by highlighting the benefits of efficiency, inclusion, and reduced transaction costs, particularly for cross-border payments. Another issue is how the public and private sectors can work together. Financial institutions and Fintech operators should be encouraged to develop advanced technological solutions for fraud prevention, which should then be integrated into digital payment systems to create a more secure and reliable environment.

Against this backdrop, regulators could leverage research findings to inform supervisory policies, encourage the adoption of the digital Euro, and mitigate the risks of financial fraud by implementing appropriate protective measures.

In addition, there are several meaningful ways in which future research could expand the scope of this study.

Firstly, increasing the geographical scope would enable comparative analyses across countries with different cultural, institutional, and regulatory frameworks. This would clarify how the relationship between financial literacy and vulnerability to fraud differs in various socioeconomic contexts.

Secondly, adopting a longitudinal research design would provide valuable insights into how financial literacy and perceptions of digital technologies evolve over time, particularly in the context of rapid technological advancement and digital transformation.

Thirdly, future studies could integrate more advanced analytical techniques, such as regression models, multivariate analysis or structural equation modeling (SEM), to evaluate the strength and direction of relationships between variables, and control for potential confounding factors. These methodological enhancements would further improve the robustness and explanatory power of the findings.

Another important area for exploration is the role of technological factors, such as internet connectivity, access to digital infrastructure, and digital literacy, in shaping both fraud exposure and the adoption of digital financial instruments. Understanding these dimensions is crucial to gauge the effectiveness of educational policies and their broader implications for financial inclusion.

Additionally, a more detailed segmentation of the sample could reveal behavioural and perceptual differences between demographic groups, such as those defined by gender, level of education, and income. This would provide more nuanced insights into targeted financial education strategies.

Finally, an economic impact assessment would quantify the influence of improved financial literacy and greater adoption of the digital Euro on financial inclusion, consumer trust, and macroeconomic stability in the euro area.

The supplementary material for this article can be found online.