BankingonTrust:HowDebitCardsHelpthePoorSaveMore
PaulGertler,UCBerkeley
WithPierreBachas,,SeanHigginsandEnriqueSeira
WorldBankJune2016
Trust"Virtuallyeverycommercialtransactionhaswithinitselfanelementoftrust....[and]muchoftheeconomicbackwardnessintheworldcanbeexplainedbythelackofmutualconfidence."
--KennethArrow(1972)
Trust"Virtuallyeverycommercialtransactionhaswithinitselfanelementoftrust....[and]muchoftheeconomicbackwardnessintheworldcanbeexplainedbythelackofmutualconfidence."
--KennethArrow(1972)
q Importantwhenexchangemoneyforpromises
q Essentialwherelegal institutionsthatenforcementofcontractsisweak
Lowtrustinbanks:aworldwidephenomenon
Source:WorldValuesSurvey
LowtrustinbanksinMexico
q FinancialCrises• 1995-96• 2008-09
q HighProfileBankFraud• 1338newspaperstorieson
bankfraudin2014-15• “HowtoSaveforYour
GraduationandAvoidFraud”• “RetirementSavingsAccounts
withMinimalRiskofFraud.”
q Worriedabout• Hiddenfees• Outrightfraud
Source:WorldValuesSurvey
LowTrustAssociatedwithLowUseofBanks
DebitCards&MobileMoneyq Trustnotinnatecharacteristic,
butinfluencedbyexperienceandinformation
qMobilemoney&debitcards§ Lowertransactionscostsfor
accesstofunds§ Alsolowercostofmonitoring(
checking)balances§ Monitorforfraud&buildtrust
ExamineEffectofDebitCardsonTrustandSavingsinOPORTUNIDADES• Conditionalcashtransferprogram• Programreaches6millionfamilies(20%ofMexico)
• In2005Transferdepositeddirectlyintoasavingsaccount• Paideverybimester ($150average)• Nodebitcards
• In2009,Attacheddebitcardstoaccounts
TimingofRoll-outandBankAccountData
AdministrativeBankAccountDataOver340,000Bansefibankaccounts◦ UrbanOportunidadesrecipients
Averagebalanceofeachaccounteachbimester
Fouryears:Nov-Dec2007toSep-Oct2011
UseofAccounts:WithdrawalsperBimester
• Thisleadstoa“mechanicaleffect”onaccountbalances• Wecalculatemechanicaleffectattheaccount-bimesterlevel• Subtractitfromaveragebalancetogetnetbalance
• SinceFEwithlaggeddependentvariablebiased(Nickell,1981),estimateusingsystemGMM(BlundellandBond,1998)• SEsclusteredbybranchwithWindmeijer(2005)finitesamplecorrection
EffectonMarginalPropensitytosave
Whatexplainsdelayedeffectovertime?
Learningtousetechnology(ATM,debitcard)
Fearthatsavingswillleadtobeingdroppedfromprogram
Buildingtrustinfinancialinstitutions
Analyses:◦ Twosurveysdesignedtoevaluatethechangetodebitcards
◦ Administrativedataonaccountbalancechecks
Testingtrustvs.learning
Testingtrustvs.learning
Buildingtrustthroughbalancechecks• Sameresultinadministrativedata
• Balancechecksdecreaseovertimewithcard
Increaseinoverallsavingsorsubstitution?EvidencefromHouseholdSurveys
• FromMPSspecificationusingadminaccountdata,after1yearsavingsincreaseby5.4%ofincome
• Fromhouseholdsurveydata,savingsincrease4.8%ofincome
IncreaseinOverallSavings(BackofEnvelope)
DoesMoneyBurnaHoleinYourPocket?
Conclusions• Trustinbanks1 reasonpoordonotusefinancialinstitutions
• Debitcards(mobilemoney)• Reducecostofaccessingsavings• butalsoreducecostofmonitoring• Buildtrustandtherebysavings
• SavingsinBanksmayhelpdealwithproblemsassociatedwithinformalsavings
• Policies• Depositinsurance&Hotlinehelp• Trusttrainingpartoffinancialliteracyprograms
• Cashtransferprogramsofferseasywaytotargetthepoorthrough“opt-out”strategies•Mayneed“trustTraining”tobeeffective
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