In January, the Wall Street Journal reported that banks are to closing brick-and-mortar branches “at a record rate,” as new technologies and financial pressures drive them to transition many of their services to digital equivalents or ATMs. But against this broader backdrop of bank closings, the market is both fragmenting and polarizing, as a handful of banks redesign their branches for specific demographic groups.
For the tech-savvy, middle-to-high income millennial who doesn’t carry cash and wants banking to be quick and convenient, Capital One advertises its new network of “360 Cafés” as places where customers can discuss account options with staff while drinking an espresso. Umqua Bank in San Francisco has a concierge at its downtown location, described in the local press as “a cross between an Apple Store, a Starbucks and a W Hotel lobby.” And Wells Fargo is piloting “mini-branches” in up-and-coming urban neighborhoods like DC’s U Street where customers, attended by trouble-shooting tablet-carrying bank employees, use sophisticated versions of self-service machines that dispense cash and take deposits, but also issue debit cards and loan applications . . .
Read More1. Remittances: Why have such rapid increases in remittances not resulted in noticeable improvements in economic growth in the recipient countries? Michael Clemens and David McKenzie investigate possible answers in a new working paper. The World Bank - Development Impact Blog
2. Poverty in the US: Over the past 30 years, government spending on the poorest Americans dwindled - those living far below the poverty line now receive less government assistance than they did in 1983 and spending has shifted to the relatively more well-off. Slate
3. Cash Transfers: After receiving $150, five days of training, and intensive supervision, ultra-poor women in Uganda doubled their business ownership and their incomes, according to a newly published study. Chrisblattman.com
Read MoreA theme on the social science blogs these days is “everything we know is wrong.”
The frequent citation of drug trials as the basis for sound social science experiments disguises an unsettling fact about medical research in general: it’s often statistically and causally naïve. Political scientist/economist Chris Blattman recently pointed to a piece documenting that a widely influential fish oil/heart disease study that had been used to sell millions of dollars of fish oil never directly measured heart disease in the population of interest. Emily Oster, an economist at the University of Chicago, is now writing regularly for data journalism site fivethirtyeight on the spurious correlations in a lot of medical research. But it’s not just a problem of medical research. “As I teach my students,” Blattman wrote, “the first thing you should say to yourself as you open every book or research paper is, ‘This is almost certainly wrong’…Welcome to science" . . .
Read MoreThomas Piketty’s recent book on inequality, the enormously popular best-seller Capital in the Twenty-First Century, explores the historical evolution of income and wealth inequality and its possible drivers. The book demonstrates that developing as well as developed economies have seen a big upswing in income inequality in recent years, as measured by the share of total income accounted for by the top percentile . . .
Read More1. Bank Transparency: Wal-Mart is known as a low-cost retailer, but customers of the independent banks inside its outlets are among America's highest payers of bank fees. The 5 banks with the most Wal-Mart branches ranked among the top 10 in fee income as a percentage of deposits in 2013. The Wall Street Journal (paywall)
2. Financial Sector Investment: A new report finds that the financial sector is now the largest beneficiary of World Bank Group investment, receiving $36 billion between July 2009 and June 2013 the IFC. Over the same period the World Bank’s public sector arms committed $22.1 billion to health and $12.4 billion to education. Bretton Woods Project
3. Credit: "There are two housing markets in America. It's not one for student debtors and one for non-student-debtors. Rather, it's one market for healthy corporations, who are buying at a historic rate; and one market for families, which is still quite sick." The Atlantic
Read More1. Mobile Money: New data show the potential of Bitcoin and mobile money for disruption in payments and transfers systems in the developing world (particularly sub-Saharan Africa) has a long way to go before becoming a reality. Business Insider
2. Payments: Despite the rise of electronic payment methods, cash is still king in the US. According to the Federal Reserve, cash is the most popular consumer payment instrument, particularly for small-value transactions. Federal Reserve Bank of San Francisco
3. Financial Inclusion: Financial Inclusion Insights (FII) announced the launch of its 2014 Open Data Challenge. Participants can win up to $5000 and a chance to present their innovative analysis of financial inclusion indicators through FII's conferences and network. Financial Inclusion Insights
Read MoreOne of the most promising innovations in the digital payments space has been on the delivery of government benefits through electronic payments systems in developing countries. Now, an impact evaluation of digitization of government payments in India by Karthik Muralidharan (UCSD), Paul Niehaus (UCSD) and Sandip Sukhtankar (Dartmouth) finds encouraging results.
In one of the largest randomized impact evaluations to date – covering 19 million people – Muralidharan and colleagues study the recent rollout of the “Smartcards” project in the state of Andhra Pradesh in India. The Smartcards project introduced biometrically-authenticated electronic benefit transfers into two large Indian social welfare programs: the well-known National Rural Employment Guarantee Scheme (NREGS) and the Social Security Pensions (SSP). The research team worked with the government to implement a randomization of the order in which districts received the program, allowing for a rigorous evaluation of program impacts half way through the implementation . . .
Read MoreLast week we blogged about the puzzle of low adoption of mobile banking accounts in Bangladesh. When we ask, people say they’re interested in mobile banking accounts. So why don’t they adopt the new technology? And why are rates of adoption so high in some places, like Kenya, and so low in Bangladesh?
Read More1. Poverty in the US: Despite improved living standards, the poor in the US have fallen further behind the middle class and the affluent in both income and consumption. In addition, the cost of many services crucial to escaping poverty — including education, health care and child care — has soared. The New York Times
2. Behavioral Economics: A new report illustrates how policy makers and human services administrators can draw on the principles of behavioral economics to design programs to better serve poor and vulnerable populations in the US. OPRE
3. Financial Services: Large financial institutions continue to move away from brick-and-mortar branches in favor of online banking – banks closed a total of 281 branches in the US in the first three months of 2014, representing approximately 2% more total closures in branches than last year. Quartz
Read MoreA collaboration between the Gates Foundation and the Gallup World Poll has gathered new data on remittances for a broad set of countries in Sub-Saharan Africa and in South Asia, home to many growing markets for mobile banking and money transfers.
Collected jointly with the Global Findex data, the new data include answers to questions such as:
- “Have you personally brought money in person or sent money to a family member or friend living in a different city or area in [your country of residence] in the last 30 days?”
- “Have you personally brought money in person or sent money to a family member or friend living in a different country in the last 30 days?”
- “Including any charges you may have incurred, was the largest amount of money you personally brought in person or sent to a family member or friend living in a different country in the last 30 days?”
Read MoreOn a recent trip to Bangladesh, one question kept pestering me: if mobile bank accounts are so good for the poor, why haven’t they adopted them already? After all, financial products and services for the poor have the potential to improve lives, but only if they are actually adopted and used.
I traveled to Bangladesh to set up a randomized controlled trial to test for the impacts of mobile banking on financial management, food security, health and self-reported well-being for poor households . . .
Read More1. Payments: Wal-Mart launched Walmart-2-Walmart this week – a new service that will allow customers to send and receive up to $900 at a time at more than 4,000 stores. The Wall Street Journal
2. Financial Inclusion: Shawn Cole of Harvard Business School stresses the importance of design in serving poor customers, specifically how the process of creating products meant to “bank the unbanked” is unique. CFI Blog
3. Cash Transfers: Christopher Blattman and Paul Niehaus discuss the latest developments in the world of cash transfers, including how they can serve as index funds for international development. Foreign Affairs
Read MoreLast week the New York Times highlighted a trend among low-income communities: people seeking tax prep at unregulated, sometimes fraudulent, pop-up shops. The article explains, "for millions of low-income Americans tax season means the biggest one-time influx of money all year." When preparers hand these customers a lump sum much larger than they're used to seeing on a daily basis, many filers don't think to check the numbers. After all, they sought a professional to do the work so they wouldn't have to . . .
Low-income tax filers are vulnerable.
Read MoreThis blog post is co-written with Barbara Magnoni and Laura Budzyna.
Do clients get value from microinsurance? This was a straightforward question asked of the MILK Project over three years ago. And as the Project comes to an end, we have come up with a perhaps uninspiring answer: Sometimes. But keep reading- the inspiration is in the nuance . . .
Read More1. Digital Payments: Facebook is finalizing preparations to begin offering financial services to its users, allowing them to store and exchange money. CNBC
2. Remittances: A new report on the impact of remittance fees on Africa's development investment claims that reducing charges to 5% would increase transfers to the continent by $1.8 billion annually. Overseas Development Institute
3. Financial Inclusion: The next generation of ATM innovations (sending money to someone, paying bills, and loading a portion of a check) may not require a bank account and could potentially provide alternative financial services to the unbanked. American Banker
Read MoreThere has been plenty written on the failure of microcredit-funded enterprises to grow or achieve more than minimal profitability. If you’re curious why microenterprises don’t grow, I recommend reading a new piece that provides some insight into the life of a microentrepreneur. It’s from an unexpected source: a Fast Company magazine article about the emerging world of task-based “entrepreneurship” in the United States. Companies like Uber, TaskRabbit, Postmates, AirBnB and Amazon (via its Mechanical Turk service) allow people to earn income by doing odd-jobs, renting out a room or running errands. The rosy view that all these companies present is that they are providing an opportunity for people to earn money on their own terms and in the hours that they are not otherwise occupied. And each prominently features stories of individuals who are doing quite well, even quitting regular jobs and substantially profiting from using these tools (not unlike, it should be noted, the stories that emanate from microcredit).
But that is not the experience of the average user . . .
Read MoreTwo weeks ago I attended a Payments Bootcamp put on by Glenbrook Partners (a 2-day class they hold several times a year) to learn more about how the payments industry works behind the scenes. There is a lot to learn. Two days allows more than just scratching the surface, but not much more. While the class is focused on the payments infrastructure in the United States particularly, the material illuminates the evolution of mobile money and digital payments in the developing world.
A better understanding of the economics of the payments industry provided the foundation for a new longer-term research project on the future of digital payments innovation in developing countries. But one thing that immediately grabbed my attention was a conversation from the first day about why the payments system in the United States is so complicated and opaque (for instance, it is now virtually impossible for a small merchant to know what fees they will pay for a credit card transaction). According to Carol Coye Benson, a Glenbrook partner teaching the course, the root cause is the stubborn refusal of consumers to be overtly charged for payments. The attitude seems to be that no one should be charged for using “their own money" . . .
Read More1. Savings: FAI affiliate Ignacio Mas challenges us to step back from usage data and rethink how we approach the development of savings products for the poor. Center for Financial Inclusion
2. Behavioral Economics: According to Helaine Olen, Americans' financial woes have "more to do with the outside economy than their inner psyche." Bloomberg
3. Payments: New research presents findings on who is using prepaid debit cards and why. One suprising finding? it's not necessarily the unbanked - 7 in 8 users have or previously had a checking account. The Pew Charitable Trusts
Read MoreOn my recent trip to Bangladesh, I had the good luck to cross paths with and chat over dinner with Maria May and Amanda Misiti, two members of the Social Innovation Lab at BRAC who are engaged in advancing the organization’s mobile money agenda. Founded in 1972 in a rural village in Bangladesh, BRAC is one of the world’s largest and most influential nonprofits, serving by its estimates over 135 million people in need . . .
Read More
Editor's Note:
If you were hoping that the faiV would be a pleasant distraction from the overwhelming flow of AI-related content, sorry. For the record, the faiV had “ai” built in before Anthropic existed. And a housekeeping note: we’ve finally jumped ship from Mailchimp to NYU’s mailing platform—I guess if you’re reading this it’s been a seamless transition and if you’re not, well, you’re not. Feedback on the faiV’s content and format and delivery methods is always welcome, just drop me an email.
- Tim Ogden