BankingonTrust:
HowDebitCardsHelpthePoorSaveMore
PaulGertlerUCBerkeley
WithPierreBachas,SeanHigginsandEnriqueSeira
May2016
Trust"Virtuallyeverycommercialtransac1onhaswithinitselfanelementoftrust....[and]muchoftheeconomicbackwardnessintheworldcanbeexplainedbythelackofmutualconfidence."
--KennethArrow(1972)
Trust"Virtuallyeverycommercialtransac1onhaswithinitselfanelementoftrust....[and]muchoftheeconomicbackwardnessintheworldcanbeexplainedbythelackofmutualconfidence."
--KennethArrow(1972)
❑ Importantwhenexchangemoneyforpromises
❑ EssenValwherelegalinsVtuVonsthatenforcementofcontractsisweak
Lowtrustinbanks:aworldwidephenomenon
Source:WorldValuesSurvey
LowtrustinbanksinMexico
❑ FinancialCrises• 1995-96• 2008-09
❑ HighProfileBankFraud• 1338newspaperstorieson
bankfraudin2014-15• “HowtoSaveforYour
Gradua1onandAvoidFraud”• “Re1rementSavings
AccountswithMinimalRiskofFraud.”
❑ Worriedabout• Hiddenfees• Outrightfraud
Source:WorldValuesSurvey
LowTrustAssociatedwithLowUseofBanks
DebitCards&MobileMoney❑ TrustnotinnatecharacterisVc,
butinfluencedbyexperienceandinformaVon
❑ Mobilemoney&debitcards▪ LowertransacVonscostsfor
accesstofunds▪ Alsolowercostofmonitoring
(checking)balances
▪ Monitorforfraud&buildtrust
ExamineEffectofDebitCardsonTrustandSavingsinOPORTUNIDADES• CondiVonalcashtransferprogram• Programreaches6millionfamilies(20%ofMexico)
• In2005Transferdepositeddirectlyintoasavingsaccount• Paideverybimester($150average)• Nodebitcards
• In2009,Ahacheddebitcardstoaccounts
TimingofRoll-outandBankAccountData
AdministraVveBankAccountData
Over340,000Bansefibankaccounts◦ UrbanOportunidadesrecipients
Averagebalanceofeachaccounteachbimester
Fouryears:Nov-Dec2007toSep-Oct2011
UseofAccounts:WithdrawalsperBimester
• Thisleadstoa“mechanicaleffect”onaccountbalances• Wecalculatemechanicaleffectattheaccount-bimesterlevel• Subtractitfromaveragebalancetogetnetbalance
• SinceFEwithlaggeddependentvariablebiased(Nickell,1981),esVmateusingsystemGMM(BlundellandBond,1998)• SEsclusteredbybranchwithWindmeijer(2005)finitesamplecorrecVon
EffectonMarginalPropensitytosave
WhatexplainsdelayedeffectoverVme?
Learningtousetechnology(ATM,debitcard)
Fearthatsavingswillleadtobeingdroppedfromprogram
BuildingtrustinfinancialinsVtuVons Analyses:◦ Twosurveysdesignedtoevaluatethechangetodebitcards
◦ AdministraVvedataonaccountbalancechecks
TesVngtrustvs.learning
TesVngtrustvs.learning
Buildingtrustthroughbalancechecks• SameresultinadministraVvedata• BalancechecksdecreaseoverVmewithcard
IncreaseinoverallsavingsorsubsVtuVon?EvidencefromHouseholdSurveys
• FromMPSspecificaVonusingadminaccountdata,amer1yearsavingsincreaseby5.4%ofincome
• Fromhouseholdsurveydata,savingsincrease4.8%ofincome
IncreaseinOverallSavings(BackofEnvelope)
DoesMoneyBurnaHoleinYourPocket?
Conclusions• Trustinbanks1reasonpoordonotusefinancialinsVtuVons
• Debitcards(mobilemoney)• Reducecostofaccessingsavings• butalsoreducecostofmonitoring• Buildtrustandtherebysavings
• SavingsinBanksmayhelpdealwithproblemsassociatedwithinformalsavings
• Policies• Depositinsurance&Hotlinehelp• Trusttrainingpartoffinancialliteracyprograms
• Cashtransferprogramsofferseasywaytotargetthepoorthrough“opt-out”strategies• Mayneed“trustTraining”tobeeffecVve