1. Cash Transfers: Opponents of cash transfers argue the poor waste their funds on alcohol and tobacco. But a review of 44 estimates of consumption across 19 studies and 13 interventions does not show evidence of increased spending on these goods. The World Bank - Development Impact Blog
2. Mobile Banking: Sometimes mobile banking is a little too helpful. The New Yorker
3. Financial Access: The bank branch may make a comeback after all - new research on issues relating to financial access among communities of color shows individuals surveyed greatly preferred to bank in person rather than use online services, even if they owned a smartphone. National Council of La Raza
Walmart is Coming for Your Banks
In April Walmart announced the launch of a new money transfer service. I did a double take on the service's low price: $9.50 to send up to $900 from one Walmart store to another – that’s as much as $66.50 cheaper than the price of competing services at Western Union and Money Gram.
This is just the latest example of Walmart's foray into the financial services industry. In 2012 the retailer launched the Bluebird prepaid card with American Express. The product has no monthly fees or minimum balance requirements, making it more affordable than the norm. The cost of cashing a check at Walmart's Money Center is a transparent flat rate, often cheaper than independent financial services centers that take a large percentage of a check's total. The big box store also offers car insurance “one stop shops” at a growing number of locations, and it houses bank branches with “convenient hours, free financial education and unusually forgiving account features”. All in all, Walmart seems to consistently deliver more budget-friendly financial tools than its competitors. And not only do its financial products come at a lower price for consumers; they are all offered in the same place, easing the burden on people who are squeezed for time and transportation . . .
Read MoreCommitments to Save - Effective but Dangerous?
Among the useful insights from behavioral economics (or behavioral science, if you prefer) is a greater understanding of the difficulties everyone faces following through on our good intentions to save for the future. People routinely say that they would like to save more—to build a cushion, for retirement, for a future vacation—but when the time comes to put money away, it gets spent instead.
Some of the most well-known and oft-cited policies and products influenced by behavioral economics address this issue
Read MoreIs There Hope for Financial Literacy Training if We Reach the Right People at the Right Time?
We at FAI have been closely following work on financial education and financial literacy to better understand whether financial education can improve financial capability. So far, the evidence has been mixed at best. A recent meta-analysis, largely focused on the United States, finds overall little evidence for impacts of financial literacy education on financial behaviors, and effects that attenuate over time.
Is financial literacy education doomed to failure? One possibility is that programs aren’t always well-targeted towards populations that could benefit most from financial education programs – the less financially sophisticated, and those newly facing important financial decisions – and that the effects of financial education programs among these populations could be significantly greater. It’s possible that reaching the right people, in the right circumstances, could make all the difference . . .
Read MoreRedesigning the Corner Bank…For Rich and Poor
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 MoreWeek of May 19, 2014
1. 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
Fish Oil : Heart Disease :: Microcredit : Women’s Empowerment?
A 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 MoreIs Piketty too Pessimistic on Financial Development and Inequality?
Thomas 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 MoreWeek of May 12, 2014
1. 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
Week of May 5, 2014
1. 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 More“But Is It Scalable?” Some Good News on Digital Payments for Large Government Programs
One 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 MoreEverybody’s Doing It: Peer Effects in Mobile Money Adoption
Last 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 MoreWeek of April 28, 2014
1. 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
New Remittance Data, Ripe for Analysis
A 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?”
Bangladesh’s bKash Adoption Puzzle
On 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 MoreWeek of April 21, 2014
1. 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 MoreUnhappy Tax Day for Some
Last 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 MoreCoping with Financial Shocks, Insurance is one Tool of Many
This 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 MoreWeek of April 14, 2014
1. 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 MoreThe Life of the "Microentrepreneur"
There 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 More