The Fintech Cascade: Conceptualising App-Driven Herd Behaviour in the Indian Stock Market through Nudge Theory

Abstract

The rapid proliferation of mobile trading and investment applications has transformed the way Indian retail investors access equity markets. Discount broking platforms, gamified user interfaces, and algorithm-driven notification systems have lowered participation costs while reshaping the psychological environment in which investment decisions are made. This conceptual paper proposes the “FinTech Cascade” framework, which integrates nudge theory with informational and reputational herd-behaviour models to explain how the choice architecture embedded in Indian investment applications may amplify herd behaviour among retail investors. Drawing on an integrative review of behavioural economics, financial herding, and digital choice-architecture literature, the paper identifies four structural gaps in existing research: the absence of an India-specific, app-level theoretical model; insufficient attention to the interaction between gamification and cultural risk attitudes; the lack of a unifying construct linking micro-level nudges to macro-level market cascades; and an underdeveloped regulatory vocabulary for distinguishing beneficial nudges from exploitative “dark nudges” in financial applications. The proposed framework conceptualises four sequential, cyclically reinforcing stages- nudge exposure, cognitive shortcut activation, social-proof amplification, and cascade materialisation- through which individual-level digital nudges may aggregate into collective market behaviour, subject to identification challenges discussed in Section 7. The paper introduces the dark-to-constructive nudge ratio as an operational regulatory construct and concludes with theoretical, managerial, and policy implications, along with an agenda for future empirical validation in the Indian context