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 MoreAmong 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 MoreWe 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 MoreIn 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 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 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 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 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 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 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 MoreLast month brought a flurry of opinions on postal banking in response to a new proposal that the US Post Office offer financial services – including bill-pay, check cashing, even small loans – to the “financially underserved.” Reactions have ranged from enthusiastic to deeply skeptical. This post highlights two key questions that have been posed and synthesizes some of the answers offered up so far.
Would the underserved consumer actually benefit?
Some say yes. There’s evidence that the Postal Service’s financial products would be able to reach people who are “significantly poorer, older, less educated, and less likely to be employed” than those who bank at formal financial institutions according to CGAP, citing a 2013 Findex report which found that as much is true in other countries with postal banking . . .
Read MoreI recently attended the launch event for Bill Easterly’s latest book, The Tyranny of Experts. His thesis is that international development policies have been determined by a group of so-called experts, who both ignore the rights of the poor and systemically violate those rights. After his presentation, Professor Easterly urged the audience to start more discussions that highlight a rights-based development agenda.
This call to action prompted me to think about how the provision of financial services can advance the rights of the poor, and reminded me of my first-hand experience with Slum Dwellers International (SDI) in Uganda. SDI is a grassroots organization of the urban poor that started in India in 1996 but now works in 33 countries . . .
Read MoreOver the past three years, I have been working on the Microinsurance Learning and Knowledge (MILK) Project, focusing on one specific question: Do clients obtain value from microinsurance? As the project comes to an end, I feel more and more that this is only one of the many questions that we should be asking as we think about how low-income people cope with risk and financial shocks. Insurance is one of many coping strategies; it is not always the quickest, the easiest, or the most accessible. But it is an important complement, and in some cases, can take the “bite” out of some of more difficult strategies such as selling assets, borrowing at high interest rates or drying up savings . . .
Read MoreLast month the Mobile Money for the Unbanked group at GSMA released their state of the industry report for 2013. They’ve been collecting data on mobile money since 2010 so a more complete picture of changes in the industry is starting to emerge, and this year for the first time they’ve added other mobile money products like insurance, credit and savings, which make up a growing piece of the mobile money pie. Though we try to keep up on what’s new in mobile money, some of the findings surprised us.
We hear that people these days are into quizzes (admit it, you already know which Game of Thrones character you are). Now get out your pencil and paper to tally up your scores, and see how much you really know about the global mobile money industry . . .
Read MoreHere on the FAI blog we’ve written many posts on the shortcomings of financial literacy training programs, both in the US and abroad. When I came across a study from the World Bank’s Development Research Group evaluating a vocational training and entrepreneurship program in Malawi, I was prepared to add this to the stack of mounting evidence of training programs that show little to no effect on business development and personal finance and move on. But in this case, the study focuses on the gendered differences of participation in the training course, not just whether or not it was effective at facilitating new business activity.
Like previous research, the Malawi study found no effects on self-employment*, but it did find significant differences in satisfaction and self-esteem between women and men after taking part in the program. The authors (Cho et al.) comment, “these differences are explained by both the conditions under which women participate in training, as well as gender differences in the training experience" . . .
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