Behavioural Interventions
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Spousal control and intra-household decision making: An experimental study in the Philippines

I elicit causal effects of spousal observability and communication on financial choices of married individuals in the Philippines. When choices are private, men put money into their personal accounts. When choices are observable, men commit money to consumption for their own benefit. When required to communicate, men put money into their wives' account. These strong treatment effects on men, but not women, appear related more to control than to gender: men whose wives control household savings respond more strongly to the treatment and women whose husbands control savings exhibit the same response. Changes in information and communication interact with underlying control to produce mutable gender-specific outcomes. 

Author: Ashraf, N. 
Year: 2009
Country: Philippines 
Product Type: Bank Account 
Product Category: Savings 

Barriers to Household Risk Management: Evidence from India

Why do many households remain exposed to large exogenous sources of non-systematic income risk? We use a series of randomized field experiments in rural India to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product. Demand is significantly price sensitive, but widespread take-up would not be achieved even if the product offered a pay-out ratio comparable to U.S. insurance contracts. We present evidence suggesting that lack of trust, liquidity constraints and limited salience are significant non-price frictions that constrain demand. We suggest contract design improvements to mitigate these frictions. 

Author: Cole, S.  |  Giné, X.  |  Tobacman, J.  |  Topalova, P.  |  Townsend, R. M.  |  Vickery, J. 
Financial Decision: Enrolment 
Year: 2013
Country: India 
Product Type: Agricultural Insurance 
Product Category: Insurance 
Intervention: Loss or Gain Framing  |  Messenger 
Intervention Area: Pricing and Financial Benefits  |  Client Communication 

Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya

Does limited access to formal savings services impede business growth in poor countries? To shed light on this question, we randomized access to noninterest-bearing bank accounts among two types of self-employed individuals in rural Kenya : market vendors ( who are mostly women) and men working as bicycle taxi drivers. Despite large withdrawal fees, a substantial share of market women used the accounts , were able to save more , and increased their productive investment and private expenditures. We see no impact for bicycle- taxi drivers. These results imply significant barriers to savings and investment for market women in our study context. 

Author: Dupas, P.  |  Robinson, J. 
Financial Decision: Total Savings Accumulated 
Year: 2013
Country: Kenya 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Discounting 
Intervention Area: Pricing and Financial Benefits 

Why don't the poor save more? Evidence from health savings experiments

Using data from a field experiment in Kenya, we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks. Simply providing a safe place to keep money was sufficient to increase health savings by 66 percent. Adding an earmarking feature was only helpful when funds were put toward emergencies, or for individuals that are frequently taxed by friends and relatives. Group-based savings and credit schemes had very large effects 

Author: Dupas, P.  |  Robinson, J. 
Financial Decision: Savings Goal Selected 
Year: 2013
Country: Kenya 
Product Type: Lock Box 
Product Category: Savings 
Intervention: Commitment Devices  |  Earmarking 
Intervention Area: Commitment Features 

Microfinance Games

Microfinance banks use group-based lending contracts to strengthen borrowers' incentives for diligence, but the contracts are vulnerable to free-riding and collusion. We systematically unpack microfinance mechanisms through ten experimental games played in an experimental economics laboratory in urban Peru. Risk-taking broadly conforms to theoretical predictions, with dynamic incentives strongly reducing risk-taking even without group-based mechanisms. Group lending increases risk-taking, especially for risk-averse borrowers, but this is moderated when borrowers form their own groups. Group contracts benefit borrowers by creating implicit insurance against investment losses, but the costs are borne by other borrowers, especially the most risk averse. 

Author: Giné, X.  |  Jakiela, P.  |  Karlan, D.  |  Morduch, J. 
Financial Decision: Repayment of Outstanding Loan 
Year: 2010
Country: Peru 
Product Type: MFI Loans 
Product Category: Credit 
Intervention: Commitment Devices  |  Standard Incentives 
Intervention Area: Commitment Features  |  Pricing and Financial Benefits 

A personal touch in text messaging can improve microloan repayment

Because payment delays and defaults significantly affect both lenders and borrowers in fragile economies, strategies to improve timely loan repayment are needed to help make credit markets work smoothly. We worked with two microlenders to test the impact of randomly assigned text message reminders for loan repayments in the Philippines. Messages improved repayment only when they included the account officer’s name and only for clients serviced by the account officer previously. These results highlight the potential and limits of communication technology for improving loan repayment rates. They also suggest that personal connections between borrowers and bank employees can be harnessed to help overcome market failures. 

Author: Karlan, D.  |  Morten, M.  |  Zinman, J. 
Financial Decision: Repayment of Outstanding Loan 
Year: 2016
Country: Philippines 
Product Type: MFI Loans 
Product Category: Credit 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

Nudging Youth to Develop Savings Habits: Experimental Evidence Using SMS Messages

A field experiment articulating financial information via cell phone text messages and financial decisions among low-income youth in Colombia. For twelve months, youth accountholders are randomly assigned to receive either: (a) monthly financial education messages, (b) monthly savings reminders, (c) semi-monthly reminders, or (d) control. After 12 months, account balances in monthly and semi-monthly reminders groups increase by 28% and 43%, respectively, relative to controls. Financial education messages do not increase balances. Over two thirds of balance increases in reminder groups are net savings. Savings effects of reminders last eight months after youth stop receiving messages. 

Author: Rodríguez, C.  |  Saavedra, J. E. 
Financial Decision: Total Savings Accumulated 
Year: 2016
Country: Colombia 
Product Type: Bank Account 
Product Category: Savings 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

Public vs. Private Mental Accounts: Empirical Evidence from Savings Groups in Colombia

I designed and implemented a Randomized Controlled Trial to study whether relatively simple modifications to how a commitment savings product was framed and labelled could affect savings accumulations and other outcomes of low-income individuals in newly formed Village Savings and Loan Associations (VSLAs) in Colombia. Motivated by hypotheses from behavioral economics the experiment tests hypotheses that behavioral responses should vary depending on whether subjects are led to label and create ‘mental savings accounts’ in private or public ways. Individuals in the private-labelling treatment groups were led to label their savings as earmarked for a particular purpose and to state savings accumulation targets, information which was shared only privately with a member of the research team. Individuals in the public-labelling treatment groups received the same intervention but were then asked to publicly reveal and announce their chosen goals to other members of their savings group. The average treatment effects of the biolabeling intervention are very strong and significant. Savings accumulations increased by an average of 35% and savings goals were 8.5% more likely to be reached in comparison to those untreated. Further explorations strongly suggests evidence of differentiated behavioral responses of individuals in the private-labelling treatment group: private commitment to a savings goal is more effective for individuals who, after random assignment but prior to the intervention, had been measured to be less constrained by economic circumstances and institutional barriers. The analysis and interpretation of results was enriched by mixed methods for data collection: households’ survey data, administrative records and qualitative data from focus groups discussions. 

Author: Salas, L. M. 
Financial Decision: Total Savings Accumulated 
Year: 2014
Country: Colombia 
Product Type: Other Savings Product 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Observing unobservables: Identifying information asymmetries with a consumer credit field experiment

Information asymmetries are important in theory but difficult to identify in practice. We estimate the presence and importance of hidden information and hidden action problems in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers to former clients of a major South African lender along three dimensions: (i) an initial "offer interest rate" featured on a direct mail solicitation; (ii) a "contract interest rate" that was revealed only after a borrower agreed to the initial offer rate; and (iii) a dynamic repayment incentive that was also a surprise and extended preferential pricing on future loans to borrowers who remained in good standing. These three randomizations, combined with complete knowledge of the lender's information set, permit identification of specific types of private information problems. Our setup distinguishes hidden information effects from selection on the offer rate (via unobservable risk and anticipated effort), from hidden action effects (via moral hazard in effort) induced by actual contract terms. We find strong evidence of moral hazard and weaker evidence of hidden information problems. A rough estimate suggests that perhaps 13% to 21% of default is due to moral hazard. Asymmetric information thus may help explain the prevalence of credit constraints even in a market that specializes in financing high-risk borrowers. 

Author: Karlan, D.  |  Zinman, J. 
Year: 2009
Country: South Africa 
Product Type: Loans 
Product Category: Credit 

Prompting Microfinance Borrowers to Save: A Field Experiment from Guatemala

None 

Author: Atkinson, J.  |  Janvry, A.  |  McIntosh, C.  |  Sadoulet, E. 
Financial Decision: Total Savings Accumulated 
Year: 2013
Country: Guatemala 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Defaults  |  Commitment Devices  |  Reminders 
Intervention Area: Default Choice Options  |  Commitment Features  |  Client Communication 

Facilitating Savings for Agriculture: Field Experimental Evidence from Malawi

We implemented a randomized intervention among Malawian farmers aimed at facilitating formal savings for agricultural inputs. Treated farmers were offered the opportunity to have their cash crop harvest proceeds deposited directly into new bank accounts in their own names, while farmers in the control group were paid harvest proceeds in cash (the status quo). The treatment led to higher savings in the months immediately prior to the next agricultural planting season, and raised agricultural input usage in that season. We also find positive treatment effects on subsequent crop sale proceeds and household expenditures. Because the treatment effect on savings was only a small fraction of the treatment effect on the value of agricultural inputs, mechanisms other than alleviation of savings constraints per se are needed to explain the treatment’s impact on input utilization. We discuss other possible mechanisms through which treatment effects may have operated. 

Author: Brune, L.  |  Giné, X.  |  Goldberg, J.  |  Yang, D. 
Financial Decision: Enrolment 
Year: 2015
Country: Malawi 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Commitment Devices  |  Prize-Linked 
Intervention Area: Commitment Features  |  Pricing and Financial Benefits 

Deposit Collectors

Informal lending and savings institutions exist around the world, and often include regular door-to-door deposit collection of cash. Some banks have adopted similar services in order to expand access to banking services in areas that lack physical branches. Using a randomized control trial, we investigate determinants of participation in a deposit collection service and evaluate the impact of offering the service for micro-savers of a rural bank in the Philippines. Of 137 individuals offered the service in the treatment group, 38 agreed to sign-up, and 20 regularly used the service. Take-up is predicted by distance to the bank (a measure of transaction costs of depositing without the service) as well as being married (a suggestion that household bargaining issues are important). Those offered the service saved 188 pesos more (which equates to about a 25% increase in savings stock) and were slightly less likely to borrow from the bank. 

Author: Ashraf, N.  |  Karlan, D.  |  Yin, W. 
Financial Decision: Total Savings Accumulated 
Year: 2005
Country: Philippines 
Product Type: Bank Account 
Product Category: Savings 

Household decision making and savings impacts: further evidence from a commitment savings product in the Philippines

Commitment devices for savings could benefit those with self-control as well as familial or spousal control issues. We find evidence to support both motivations. We examine the impact of a commitment savings product in the Philippines on household decision making power and self-perception of savings behavior, as well as actual savings. The product leads to more decision making power in the household for women, and likewise more purchases of female-oriented durable goods. We also find that the product leads women who appear time-inconsistent in a baseline survey to self-report being a disciplined saver in the follow-up survey. For impact on savings balances, we find that the 81% increase in savings after one year did not crowd out savings held outside of the participating bank, but that the longer-term impact over two and a half years on bank savings dissipated to only a 33% increase, which is no longer statistically significant. We discuss reasons why the effect dissipated and the implications for designing and implementing sustainable, equilibrium-shifting interventions. 

Author: Ashraf, N.  |  Karlan, D.  |  Yin, W. 
Financial Decision: Total Savings Accumulated 
Year: 2005
Country: Philippines 
Product Type: Lock Box 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

What's Psychology Worth? A Field Experiment in the Consumer Credit Market

Numerous laboratory studies report on behaviours inconsistent with rational economic models. How much do these inconsistencies matter in natural settings, when consumers make large, real decisions and have the opportunity to learn from experiences? We report on a field experiment designed to address this question. Incumbent clients of a lender in South Africa were sent letters offering them large, short-term loans at randomly chosen interest rates. Psychological “features” on the letter, which did not affect offer terms or economic content, were also independently randomized. Consistent with standard economics, the interest rate significantly affected loan take-up. Inconsistent with standard economics, the psychological features also significantly affected take-up. The independent randomizations allow us to quantify the relative importance of psychological features and prices. Our core finding is the sheer magnitude of the psychological effects. On average, any one psychological manipulation has the same effect as a one half percentage point change in the monthly interest rate. Interestingly, the psychological features appear to have greater impact in the context of less advantageous offers. Moreover, the psychological features do not appear to draw in marginally worse clients, nor does the magnitude of the psychological effects vary systematically with income or education. In short, even in a market setting with large stakes and experienced customers, subtle psychological features that normatively ought to have no impact appear to be extremely powerful drivers of behavior. 

Author: Bertrand, M.  |  Karlan, D.  |  Mullainathan, S.  |  Shafir, E.  |  Zinman, J. 
Financial Decision: Enrolment 
Year: 2005
Country: South Africa 
Product Type: Loans 
Product Category: Credit 
Intervention: Framing  |  Prize-Linked 
Intervention Area: Pricing and Financial Benefits 

What's Advertising Content Worth? Evidence from a consumer credit marketing field experiment

Firms spend billions of dollars each year advertising consumer products in order to influence demand. Much of these outlays are on the creative design of advertising content. Creative content often uses nuances of presentation and framing that have large effects on consumer decision making in laboratory studies. But there is little field evidence on the effect of advertising content as it compares in magnitude to the effect of price. We analyse a direct mail field experiment in South Africa implemented by a consumer lender that randomized creative content and loan price simultaneously. We find that content has significant effects on demand. There is also some evidence that the magnitude of content sensitivity is large relative to price sensitivity. However, it was difficult to predict which particular types of content would significantly impact demand. This fits with a central premise of psychology context matters— and highlights the importance of testing the robustness of laboratory findings in the field. 

Author: Bertrand, M.  |  Karlan, D.  |  Mullainathan, S.  |  Shafir, E.  |  Zinman, J. 
Financial Decision: Enrolment 
Year: 2010
Country: South Africa 
Product Type: Loans 
Product Category: Credit 
Intervention: Framing  |  Prize-Linked 
Intervention Area: Pricing and Financial Benefits 

Getting to the Top of Mind: How Reminders Increase Saving

We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of present-bias. Our model also generates the unique predictions that reminders may increase saving, and that reminders will be more effective when they increase the salience of a specific expenditure. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders. 

Author: Karlan, D.  |  McConnell, M.  |  Mullainathan, S.  |  Zinman, J. 
Financial Decision: Total Savings Accumulated 
Year: 2010
Country: Philippines 
Product Type: Bank Account 
Product Category: Savings 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

Getting to the Top of Mind: How Reminders Increase Saving

We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of present-bias. Our model also generates the unique predictions that reminders may increase saving, and that reminders will be more effective when they increase the salience of a specific expenditure. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders. 

Author: Karlan, D.  |  McConnell, M.  |  Mullainathan, S.  |  Zinman, J. 
Financial Decision: Total Savings Accumulated 
Year: 2010
Country: Peru 
Product Type: Bank Account 
Product Category: Savings 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

Getting to the Top of Mind: How Reminders Increase Saving

We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of present-bias. Our model also generates the unique predictions that reminders may increase saving, and that reminders will be more effective when they increase the salience of a specific expenditure. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders. 

Author: Karlan, D.  |  McConnell, M.  |  Mullainathan, S.  |  Zinman, J. 
Financial Decision: Total Savings Accumulated 
Year: 2010
Country: Bolivia 
Product Type: Bank Account 
Product Category: Savings 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

Self Control and Liquidity: How to Design a Commitment Contract

If individuals have self-control problems that lead them to spend money when they had previously planned to save it, they may take up financial commitment devices that restrict their future ability to access their funds. We experimentally investigate how the demand for commitment contracts is affected by contract design features. In our experiments, each subject is endowed with a sum of money and asked to divide that money between a liquid account, which permits unrestricted withdrawals at any time over the course of the months-long experiment, and one or more commitment accounts, which impose withdrawal penalties or restrictions. The design features of the liquid account are the same for all subjects, but the design features of the commitment account(s) are randomized across subjects. When the interest rates on the two types of accounts are the same, we find that allocations to a commitment account are higher when the account is less liquid. The commitment account that disallows early withdrawals altogether attracts the largest allocations. However, this relationship no longer holds when the commitment account interest rate is greater than the liquid account interest rate. 

Author: Beshears, J. L.  |  Choi, J. J.  |  Laibson, D.  |  Madrian, B. C.  |  Sakong, J. 
Financial Decision: Contribution Levels 
Year: 2012
Country: United States 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Between Intention and Action: An Experiment on Individual Savings

This study provides experimental evidence about the barriers to adoption of formal savings in Africa. In collaboration with a large commercial bank, I conduct an experiment designed to measure the relative importance of convenience and information on the adoption of formal savings. When individuals can open an account at their place of business they are much more likely to open an account. Novel information about the benefits of savings has a slight but insignificant negative effect on account opening. While over half (55%) of individuals report an interest in opening an account when initially approached, only 2% of individuals are using the accounts 2 months later. I explore several potential explanations between individuals' self-reports of interest in the accounts and their later behaviour. I argue that individuals' behaviour in the experiment is consistent with social pressure to conform to the encouragement to open an account and some projection bias in predicting their future behavior. The results illustrate that for individuals struggling to save, encouraging enrolment in formal finance may be less effective than tools which help individuals follow-through with self-reported savings intentions. 

Author: McConnell, M. 
Financial Decision: Enrolment  |  Total Savings Accumulated 
Year: 2012
Country: Ghana 
Product Type: Bank Account 
Product Category: Savings 

Quasi-experimental evidence on the drivers of index-based livestock insurance demand in Southern Ethiopia

Microinsurance is widely considered an important tool for sustainable poverty reduction, especially in the face of increasing climate risk. Although index-based microinsurance, which should be free from the classical incentive problems, has attracted considerable attention, uptake rates have generally been weak in low-income rural communities. We explore the purchase patterns of index-based livestock insurance in southern Ethiopia, focusing in particular on the role of accurate product comprehension and price, including the prospective impact of temporary discount coupons on subsequent period demand due to price anchoring effects. We find that randomly distributed learning kits contribute to improving subjects’ knowledge of the products; however, we do not find strong evidence that the improved knowledge per se induces greater uptake. We also find that reduced price due to randomly distributed discount coupons has an immediate, positive impact on uptake, without dampening subsequent period demand due to reference-dependence associated with price anchoring effects. 

Author: Barrett, C. B.  |  Ikegami, M.  |  Sheahan, M.  |  Takahashi, K. 
Financial Decision: Cover Level Selected  |  Enrolment 
Year: 2014
Country: Ethiopia 
Product Type: Index-Based Livestock Insurance 
Product Category: Insurance 
Intervention: Standard Incentives 
Intervention Area: Pricing and Financial Benefits 

The Economics and Psychology of Long-Term Savings and Pensions

This policy brief describes lessons from a large-scale field experiment that utilizes a pension instrument to understand the determinants of long-term savings among low income entrepreneurs in rural and semi-urban Western India. With a majority of the Indian working population employed in the informal sector without access to social security benefits, savings and pension products, and minimal access to sources of credit, the financial vulnerability of these groups is of growing concern. As we attempt to economically empower these vulnerable groups, a key policy concern is encouraging them to voluntary participate in long term savings, irrespective of variations in time and income flows – a move which will go a long way in ensuring financial security. We use a commitment savings pension instrument to explore different demand-side factors to inform policy on incentivizing long term savings behavior among low income households across developing countries. 

Author: Basu, K.  |  Bisht, S. S. 
Financial Decision: Enrolment 
Year: None
Country: India 
Product Type: Pension 
Product Category: Savings 
Intervention: Loss or Gain Framing 
Intervention Area: Pricing and Financial Benefits 

The Economics and Psychology of Long-Term Savings and Pensions

This policy brief describes lessons from a large-scale field experiment that utilizes a pension instrument to understand the determinants of long-term savings among low income entrepreneurs in rural and semi-urban Western India. With a majority of the Indian working population employed in the informal sector without access to social security benefits, savings and pension products, and minimal access to sources of credit, the financial vulnerability of these groups is of growing concern. As we attempt to economically empower these vulnerable groups, a key policy concern is encouraging them to voluntary participate in long term savings, irrespective of variations in time and income flows – a move which will go a long way in ensuring financial security. We use a commitment savings pension instrument to explore different demand-side factors to inform policy on incentivizing long term savings behavior among low income households across developing countries. 

Author: Basu, K.  |  Bisht, S. S. 
Financial Decision: Total Savings Accumulated 
Year: None
Country: India 
Product Type: Pension 
Product Category: Savings 
Intervention: Standard Incentives 
Intervention Area: Pricing and Financial Benefits 

Does Microfinance Repayment Flexibility Affect Entrepreneurial Behaviour and Loan Default?

Recent evidence suggests heterogeneous impacts of microfinance loans, with limited average effects on enterprise growth among the poor. One possibility is that the rigidity of the classic microcredit contract - widely held to be important for reducing default - inhibits investment in microenterprises. To explore these trade-offs, we provide experimental estimates of the consequences for client investment behavior of introducing a grace period before repayment begins. Delaying the onset of repayment by two months significantly increases both business investment and default. Taken together, the results are consistent with clients on the delay cycle choosing investments with higher expected income but more variable returns. 

Author: Field, E.  |  Pande, R.  |  Papp, J. 
Financial Decision: Repayment of Outstanding Loan 
Year: 2010
Country: India 
Product Type: MFI Loans 
Product Category: Credit 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Filling the Gap: Innovative and Interactive Ways to Increase the Savings of Rural Women in India

The gender gap in financial literacy (knowledge and capability) shows many women are not informed to make decisions on which products and services to take up as well as how to manage their long-term finances. Development experts argue that what women truly need is education and counselling on how to maximize the minimal funds they are investing and saving. At the same time, financial education is not enough if women do not have access to saving products. Experts argue that due to self-control or spousal control issues, women need specific mechanisms that help them commit to save. As liquidity is the main concern that women face, women need highly liquid savings products, at the same time, these savings products should help them commit to a savings plan. Lately, economists and researchers have experimented with commitment savings instruments beyond basic banking access, such as, a secure lockbox to store money, saving with the group, and others. We conducted an experiment in Bihar, eastern state of India, with 203 women, many of whom were a part of Self Help Groups (SHGs). We tested context-specific Financial Education (FE) to understand whether these modules help women become more aware of their savings habits. We also provided an alternate savings tool--a lock box with a key--to see if the highly flexible savings products could improve their savings capability. Findings suggest that providing a low-cost tool such as a lock box, along with the relatable FE modules, improved the savings behaviour of women. For example, savings of women in our study group increased by 42-50% within a 3-month period. A mere placement of the concept of daily savings in the minds of women brought about a shift in their perception of their own income. Placing small change in a lock box with a key provided a safe space to protect from unnecessary daily expenditure and simultaneously promoted dialogue within the household itself on future-oriented spending. 

Author: Bhattacharya, S.  |  Kc, D.  |  Mehta, V.  |  Tiwari, M. 
Financial Decision: Total Savings Accumulated 
Year: 2015
Country: India 
Product Type: Lock Box 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Smallholder access to weather securities in India

Weather-based insurance products insure farmers against production risks on the basis of a weather index that is highly correlated to local yields. Indemnifications are triggered by prespecified patterns of the index, as opposed to actual yields. This eliminates the requirement of on-field assessments for indemnification, thereby lowering administrative costs and time. Therefore, index-based insurance products have been regarded as having enormous potential to reach small farmers in developing countries. Surprisingly, the demand and take-up rates are low for weather index insurance (WII) products. One of the reasons hypothesised for the low demand and take-up of index-based insurance products is their inherent complexity, which makes it difficult for farmers to perceive the direct benefits. Hence, to encourage stronger participation, the project introduced an innovative WII product that was simple, transparent, flexible and affordable for smallholder farmers. In fact, the insurance product was a menu of very simple insurance options, each with a flat payment, but different triggers and for different coverage periods. This product was tested in three districts of Madhya Pradesh, India, during two consecutive summer agricultural seasons (known as kharif in India) in 2011 and 2012 among the farmers who were cultivating rained soya bean crop. . 

Author: Butler, A.  |  Ceballos, F.  |  Manuel R, I.  |  Robles, M. 
Financial Decision: Enrolment 
Year: 2015
Country: India 
Product Type: Weather-Indexed Insurance 
Product Category: Insurance 
Intervention: Standard Incentives 
Intervention Area: Pricing and Financial Benefits 

Message framing and buying behavior: A field experiment

The article examines the impact of message framing on real life buying behavior. Customers of a credit card company who did not use the card for a three-month period received a communication explaining the benefits of the card. These benefits were explained either in terms of gains the customers could obtain from using the card or in terms of losses they could suffer from not using it. Card usage was monitored for two months after the message. Results indicated that the impact of the loss-framed message was much stronger than the impact of the gain-framed message. The percentage of customers who started to use the card in the loss condition was more than double the percentage in the gain conditions, and the charges of the former customers were more than twice as much as the charges of the latter customers. In addition, an interview conducted with some of the customers 6 months after the initial contact revealed an effect of framing on persuasiveness and recall of the message and on involvement with the method of payment. 

Author: Ganzach, Y.  |  Karsahi, N. 
Financial Decision: Selected Repayment Contribution 
Year: 1995
Country: Israel 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Loss or Gain Framing 
Intervention Area: Pricing and Financial Benefits 

Dual payoff scenario warnings on credit card statements elicit suboptimal payoff decisions

U.S. Federal regulation from 2009 requires credit card companies to convey information regarding payoff scenarios, i.e., details such as total amount paid and time to pay off when only a minimum payment is made (over time). Across seven studies, the present research shows that consumers who were given a dual payoff scenario (i.e., how much is paid in total based on the minimum payment and also based on a 3-year payoff window) on credit card statements recommended lower payments than those given a single payoff scenario (when the 3-year payment amount was less than what they would have paid otherwise), and were less likely to pay off the balance in full. The effect is driven by a tendency of consumers to infer that the 3-year payment amount is the most appropriate. The dual-scenario effect is minimized by an intervention that draws attention away from the 3-year payment amount. Theoretical and public policy implications are considered. 

Author: Hershfield, H. E.  |  Roese, N. J. 
Financial Decision: Selected Repayment Contribution 
Year: 2015
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Dual payoff scenario warnings on credit card statements elicit suboptimal payoff decisions

U.S. Federal regulation from 2009 requires credit card companies to convey information regarding payoff scenarios, i.e., details such as total amount paid and time to pay off when only a minimum payment is made (over time). Across seven studies, the present research shows that consumers who were given a dual payoff scenario (i.e., how much is paid in total based on the minimum payment and also based on a 3-year payoff window) on credit card statements recommended lower payments than those given a single payoff scenario (when the 3-year payment amount was less than what they would have paid otherwise), and were less likely to pay off the balance in full. The effect is driven by a tendency of consumers to infer that the 3-year payment amount is the most appropriate. The dual-scenario effect is minimized by an intervention that draws attention away from the 3-year payment amount. Theoretical and public policy implications are considered. 

Author: Hershfield, H. E.  |  Roese, N. J. 
Financial Decision: Selected Repayment Contribution 
Year: 2015
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Dual payoff scenario warnings on credit card statements elicit suboptimal payoff decisions

U.S. Federal regulation from 2009 requires credit card companies to convey information regarding payoff scenarios, i.e., details such as total amount paid and time to pay off when only a minimum payment is made (over time). Across seven studies, the present research shows that consumers who were given a dual payoff scenario (i.e., how much is paid in total based on the minimum payment and also based on a 3-year payoff window) on credit card statements recommended lower payments than those given a single payoff scenario (when the 3-year payment amount was less than what they would have paid otherwise), and were less likely to pay off the balance in full. The effect is driven by a tendency of consumers to infer that the 3-year payment amount is the most appropriate. The dual-scenario effect is minimized by an intervention that draws attention away from the 3-year payment amount. Theoretical and public policy implications are considered. 

Author: Hershfield, H. E.  |  Roese, N. J. 
Financial Decision: Selected Repayment Contribution 
Year: 2015
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Dual payoff scenario warnings on credit card statements elicit suboptimal payoff decisions

U.S. Federal regulation from 2009 requires credit card companies to convey information regarding payoff scenarios, i.e., details such as total amount paid and time to pay off when only a minimum payment is made (over time). Across seven studies, the present research shows that consumers who were given a dual payoff scenario (i.e., how much is paid in total based on the minimum payment and also based on a 3-year payoff window) on credit card statements recommended lower payments than those given a single payoff scenario (when the 3-year payment amount was less than what they would have paid otherwise), and were less likely to pay off the balance in full. The effect is driven by a tendency of consumers to infer that the 3-year payment amount is the most appropriate. The dual-scenario effect is minimized by an intervention that draws attention away from the 3-year payment amount. Theoretical and public policy implications are considered. 

Author: Hershfield, H. E.  |  Roese, N. J. 
Financial Decision: Selected Repayment Contribution 
Year: 2015
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Dual payoff scenario warnings on credit card statements elicit suboptimal payoff decisions

U.S. Federal regulation from 2009 requires credit card companies to convey information regarding payoff scenarios, i.e., details such as total amount paid and time to pay off when only a minimum payment is made (over time). Across seven studies, the present research shows that consumers who were given a dual payoff scenario (i.e., how much is paid in total based on the minimum payment and also based on a 3-year payoff window) on credit card statements recommended lower payments than those given a single payoff scenario (when the 3-year payment amount was less than what they would have paid otherwise), and were less likely to pay off the balance in full. The effect is driven by a tendency of consumers to infer that the 3-year payment amount is the most appropriate. The dual-scenario effect is minimized by an intervention that draws attention away from the 3-year payment amount. Theoretical and public policy implications are considered. 

Author: Hershfield, H. E.  |  Roese, N. J. 
Financial Decision: Selected Repayment Contribution 
Year: 2015
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Dual payoff scenario warnings on credit card statements elicit suboptimal payoff decisions

U.S. Federal regulation from 2009 requires credit card companies to convey information regarding payoff scenarios, i.e., details such as total amount paid and time to pay off when only a minimum payment is made (over time). Across seven studies, the present research shows that consumers who were given a dual payoff scenario (i.e., how much is paid in total based on the minimum payment and also based on a 3-year payoff window) on credit card statements recommended lower payments than those given a single payoff scenario (when the 3-year payment amount was less than what they would have paid otherwise), and were less likely to pay off the balance in full. The effect is driven by a tendency of consumers to infer that the 3-year payment amount is the most appropriate. The dual-scenario effect is minimized by an intervention that draws attention away from the 3-year payment amount. Theoretical and public policy implications are considered. 

Author: Hershfield, H. E.  |  Roese, N. J. 
Financial Decision: Selected Repayment Contribution 
Year: 2015
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Dual payoff scenario warnings on credit card statements elicit suboptimal payoff decisions

U.S. Federal regulation from 2009 requires credit card companies to convey information regarding payoff scenarios, i.e., details such as total amount paid and time to pay off when only a minimum payment is made (over time). Across seven studies, the present research shows that consumers who were given a dual payoff scenario (i.e., how much is paid in total based on the minimum payment and also based on a 3-year payoff window) on credit card statements recommended lower payments than those given a single payoff scenario (when the 3-year payment amount was less than what they would have paid otherwise), and were less likely to pay off the balance in full. The effect is driven by a tendency of consumers to infer that the 3-year payment amount is the most appropriate. The dual-scenario effect is minimized by an intervention that draws attention away from the 3-year payment amount. Theoretical and public policy implications are considered. 

Author: Hershfield, H. E.  |  Roese, N. J. 
Financial Decision: Selected Repayment Contribution 
Year: 2015
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Effects of Payment Mechanism on Spending Behavior: The Role of Rehearsal and Immediacy of Payments

Past expenses have been shown to influence future spending behavior by depleting available budgets. However, a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them. This article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending. Specifically, past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid (rehearsal) and when the consumer’s wealth is depleted immediately rather than with a delay (immediacy). Two experiments show support for the proposed theoretical framework. 

Author: Soman, D. 
Financial Decision: Payment Frequency 
Year: 2001
Country: United States 
Product Type: Cheque Book  |  Credit Card 
Product Category: Credit 
Intervention: Salience 
Intervention Area: Not Specified 

Banking the Poor via Savings Accounts: Evidence from a Field Experiment

The majority of the poor lack access to bank accounts and have to use costly informal savings mechanisms. Using a field experiment, I randomly gave access to simple bank accounts with no fees at local bank branches to a large sample of female household heads in Nepal. Results show that there is untapped demand for savings accounts and that the poor do save. Access to the savings accounts increased monetary assets and total assets without crowding out other kinds of assets or savings institutions. Finally, financial access strongly increased households’ investments in health and education. 

Author: Prina, S. 
Financial Decision: Total Savings Accumulated 
Year: 2013
Country: Nepal 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Defaults 
Intervention Area: Default Choice Options 

Directing remittances to education with soft and hard commitments: Evidence from a lab-in-the-field experiment and new product take-up among Filipino migrants in Rome

This paper tests how migrants’ willingness to remit changes when given the ability to direct remittances to educational purposes using different forms of commitment. Variants of a dictator game in a lab-in-the-field experiment with Filipino migrants in Rome are used to examine remitting behaviour under varying degrees of commitment. These range from the soft commitment of simply labelling remittances as being for education, to the hard commitment of having funds directly paid to a school and the student’s educational performance monitored. We find that the introduction of simple labelling for education raises remittances by more than 15%. Adding the ability to directly send this funding to the school adds only a further 2.2%. We randomly vary the information asymmetry between migrants and their most closely connected household, but find no significant change in the remittance response to these forms of commitment as information varies. Behaviour in these games is then shown to be predictive of take-up of a new financial product called EduPay, designed to allow migrants to directly pay remittances to schools in the Philippines. We find this take-up is largely driven by a response to the ability to label remittances for education, rather than to the hard commitment feature of directly paying schools. 

Author: De Arcangelis, G.  |  Joxhe, M.  |  McKenzie, D.  |  Tiongson, E.  |  Yang, D. 
Financial Decision: Payment Amount 
Year: 2015
Country: Italy 
Product Type: Cross-Border Remittances 
Product Category: Payments 
Intervention: Earmarking  |  Implementation Intention 
Intervention Area: Commitment Features 

Bank-Insured RoSCA for Microfinance: Experimental Evidence in Poor Egyptian Villages

Microfinance institutions (MFIs) have continued to grow over the past few decades, both in numbers of clients and portfolio sizes. The growth of these MFIs has enabled greater access to credit in many of the world’s less developed nations. However, recent studies have shown that very many of the poor – especially Muslims – remain unbanked, and many who have access to banks remain credit constrained. Confounding this problem in many Muslim countries is the poor’s propensity to reject microfinance, when available, on religious grounds. In this paper we propose an alternative microfinance model built on the familiar rotating savings and credit association (RoSCA) model that is Islamically accepted, and test its performance against sequential Grameenstyle microcredit provision in a “laboratory experiment in the field” conducted in poor Egyptian villages. Our model of bankinsured RoSCAs is shown to solve coordinationfailure problems that may otherwise prevent the spontaneous development of informal RoSCAs in practice. Empirically, our guaranteedRoSCA model generated significantly higher takeup and repayment rates than the Grameen model, suggesting that this model can be a useful alternative for Islamic countries where many of the poor have rejected conventional modes of microfinance. 

Author: El-Gamal, M.  |  El-Komi, M.  |  Karlan, D.  |  Osman, A. 
Financial Decision: Repayment of Outstanding Loan 
Year: 2011
Country: Egypt 
Product Type: Loans 
Product Category: Credit 
Intervention: Social Norms 
Intervention Area: Client Communication 

Moral Hazard and Peer Monitoring in a Laboratory Microfinance Experiment

Most problems with formal sector credit lending to the poor in developing countries can be attributed to the lack of information and inadequate collateral. One common feature of successful credit mechanisms is group-lending, where the loan is advanced to an individual if he/she is a part of a group and members of the borrowing group can monitor each other. Since group members have better information about each other compared to lenders, peer monitoring is often less expensive than lender monitoring. Theoretically this leads to greater monitoring and greater rates of loan repayments. This paper reports the results from a laboratory experiment of group lending in the presence of moral hazard and (costly) peer monitoring. We compare peer monitoring treatments when credit is provided to members of the group sequentially and simultaneously, and individual lending with lender monitoring. The results depend on the relative cost of monitoring by the peer vis-à-vis the lender. In the more typical case where the cost of peer monitoring is lower than the cost of lender monitoring, our results suggest that peer monitoring results in higher loan frequencies, higher monitoring and higher repayment rates compared to lender monitoring. In the absence of monitoring cost differences, performance is mostly similar across group and individual lending schemes, although loan frequencies and monitoring rates are sometimes modestly greater with group lending. Within group lending, although the dynamic incentives provided by sequential leading generate the greatest equilibrium surplus, simultaneous group leading provides equivalent empirical performance. 

Author: Cason, T. N.  |  Gangadharan, L.  |  Maitra, P. 
Financial Decision: Selected Repayment Contribution 
Year: 2008
Country: Australia  |  India 
Intervention: Social Norms 
Intervention Area: Client Communication 

Consumers' credit card repayment decisions: The role of higher anchors and future repayment concern

We investigated two aspects of credit card repayment decisions: the extent to which the anchoring effect of minimum repayment information may be mitigated by information on alternative anchors, specifically repayments that would repay the balance in two years (Study 1) or nine months (Study 2); and the role of future repayment concern. In two experiments, three realistic credit card statements were presented with different outstanding balances. Participants, who were randomly allocated to one of four information conditions depending on supplementary information provided on the statements, stated how much they would repay that month. They were then asked about concerns they would have about repayment difficulties if they had a fixed consumer loan over three years. In Study 1 the alternative two-year repayment anchor had a negative effect on percent repayment, whereas in Study 2 the nine-month repayment anchor had a significant positive effect, especially for those with higher future repayment concern. Also, in both studies, future repayment concern had a direct inverse effect on repayment decisions which partially mediated the effect of disposable income. It is concluded that the addition to credit card statements of a table of cost and duration information for a range of repayment amounts may usefully support repayment decisions. 

Author: McHugh, S.  |  Ranyard, R. 
Financial Decision: Selected Repayment Contribution 
Year: 2016
Country: United Kingdom 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Consumers' credit card repayment decisions: The role of higher anchors and future repayment concern

We investigated two aspects of credit card repayment decisions: the extent to which the anchoring effect of minimum repayment information may be mitigated by information on alternative anchors, specifically repayments that would repay the balance in two years (Study 1) or nine months (Study 2); and the role of future repayment concern. In two experiments, three realistic credit card statements were presented with different outstanding balances. Participants, who were randomly allocated to one of four information conditions depending on supplementary information provided on the statements, stated how much they would repay that month. They were then asked about concerns they would have about repayment difficulties if they had a fixed consumer loan over three years. In Study 1 the alternative two-year repayment anchor had a negative effect on percent repayment, whereas in Study 2 the nine-month repayment anchor had a significant positive effect, especially for those with higher future repayment concern. Also, in both studies, future repayment concern had a direct inverse effect on repayment decisions which partially mediated the effect of disposable income. It is concluded that the addition to credit card statements of a table of cost and duration information for a range of repayment amounts may usefully support repayment decisions. 

Author: McHugh, S.  |  Ranyard, R. 
Financial Decision: Selected Repayment Contribution 
Year: 2016
Country: United Kingdom 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Increasing saving behavior through age-progressed renderings of the future self

Many people fail to save what they need to for retirement (Munnell, Webb, and Golub-Sass 2009). Research on excessive discounting of the future suggests that removing the lure of immediate rewards by pre-committing to decisions, or elaborating the value of future rewards can both make decisions more future-oriented. In this article, we explore a third and complementary route, one that deals not with present and future rewards, but with present and future selves. In line with thinkers who have suggested that people may fail, through a lack of belief or imagination, to identify with their future selves (Parfit 1971; Schelling 1984), we propose that allowing people to interact with age-progressed renderings of themselves will cause them to allocate more resources toward the future. In four studies, participants interacted with realistic computer renderings of their future selves using immersive virtual reality hardware and interactive decision aids. In all cases, those who interacted with virtual future selves exhibited an increased tendency to accept later monetary rewards over immediate ones. 

Author: Bailenson, J. N.  |  Carstensen, L. L.  |  Fox, J.  |  Goldstein, D. G.  |  Hershfield, H. E.  |  Sharpe, W. F.  |  Yeykelis, L. 
Financial Decision: Total Savings Accumulated 
Year: 2011
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Virtual Reality 
Intervention Area: Not Specified 

Increasing saving behavior through age-progressed renderings of the future self

Many people fail to save what they need to for retirement (Munnell, Webb, and Golub-Sass 2009). Research on excessive discounting of the future suggests that removing the lure of immediate rewards by pre-committing to decisions, or elaborating the value of future rewards can both make decisions more future-oriented. In this article, we explore a third and complementary route, one that deals not with present and future rewards, but with present and future selves. In line with thinkers who have suggested that people may fail, through a lack of belief or imagination, to identify with their future selves (Parfit 1971; Schelling 1984), we propose that allowing people to interact with age-progressed renderings of themselves will cause them to allocate more resources toward the future. In four studies, participants interacted with realistic computer renderings of their future selves using immersive virtual reality hardware and interactive decision aids. In all cases, those who interacted with virtual future selves exhibited an increased tendency to accept later monetary rewards over immediate ones. 

Author: Bailenson, J. N.  |  Carstensen, L. L.  |  Fox, J.  |  Goldstein, D. G.  |  Hershfield, H. E.  |  Sharpe, W. F.  |  Yeykelis, L. 
Financial Decision: Total Savings Accumulated 
Year: 2011
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Virtual Reality 
Intervention Area: Not Specified 

Increasing saving behavior through age-progressed renderings of the future self

Many people fail to save what they need to for retirement (Munnell, Webb, and Golub-Sass 2009). Research on excessive discounting of the future suggests that removing the lure of immediate rewards by pre-committing to decisions, or elaborating the value of future rewards can both make decisions more future-oriented. In this article, we explore a third and complementary route, one that deals not with present and future rewards, but with present and future selves. In line with thinkers who have suggested that people may fail, through a lack of belief or imagination, to identify with their future selves (Parfit 1971; Schelling 1984), we propose that allowing people to interact with age-progressed renderings of themselves will cause them to allocate more resources toward the future. In four studies, participants interacted with realistic computer renderings of their future selves using immersive virtual reality hardware and interactive decision aids. In all cases, those who interacted with virtual future selves exhibited an increased tendency to accept later monetary rewards over immediate ones. 

Author: Bailenson, J. N.  |  Carstensen, L. L.  |  Fox, J.  |  Goldstein, D. G.  |  Hershfield, H. E.  |  Sharpe, W. F.  |  Yeykelis, L. 
Financial Decision: Total Savings Accumulated 
Year: 2011
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Virtual Reality 
Intervention Area: Not Specified 

Increasing saving behavior through age-progressed renderings of the future self

Many people fail to save what they need to for retirement (Munnell, Webb, and Golub-Sass 2009). Research on excessive discounting of the future suggests that removing the lure of immediate rewards by pre-committing to decisions, or elaborating the value of future rewards can both make decisions more future-oriented. In this article, we explore a third and complementary route, one that deals not with present and future rewards, but with present and future selves. In line with thinkers who have suggested that people may fail, through a lack of belief or imagination, to identify with their future selves (Parfit 1971; Schelling 1984), we propose that allowing people to interact with age-progressed renderings of themselves will cause them to allocate more resources toward the future. In four studies, participants interacted with realistic computer renderings of their future selves using immersive virtual reality hardware and interactive decision aids. In all cases, those who interacted with virtual future selves exhibited an increased tendency to accept later monetary rewards over immediate ones. 

Author: Bailenson, J. N.  |  Carstensen, L. L.  |  Fox, J.  |  Goldstein, D. G.  |  Hershfield, H. E.  |  Sharpe, W. F.  |  Yeykelis, L. 
Financial Decision: Total Savings Accumulated 
Year: 2011
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Virtual Reality 
Intervention Area: Not Specified 

Minimum required payment and supplemental information disclosure effects on consumer debt repayment decisions

Repayment decisions—how much of the loan to repay and when to make the payments—directly influence consumer debt levels. The authors examine how minimum required payment policy and loan information disclosed to consumers influence repayment decisions. They find that though presenting minimum required payment information has a negative impact on repayment decisions, increasing the minimum required level has a positive effect on repayment for most consumers. Experimental evidence from U.S. consumers shows that consumers’ propensity to pay the minimum required each month moderates these effects; U.K. credit card field data indicates that these effects are also moderated by borrowers’ credit limit and balance due. However, increasing the minimum level is unlikely to completely eliminate the negative effect of presenting minimum payment information. In addition, disclosing supplemental information, such as future interest cost and time needed to repay the loan, does not reduce the negative effects of including minimum payment information and has no substantial positive effect on repayments. This research offers new insights into the debt repayment process and has implications for consumers, lenders, and public policy. 

Author: Harris, A. J.  |  Lemon, K. N.  |  Matthews, W. J.  |  Navarro-Martinez, D.  |  Salisbury, L. C.  |  Stewart, N. 
Financial Decision: Selected Repayment Contribution 
Year: 2011
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Minimum required payment and supplemental information disclosure effects on consumer debt repayment decisions

Repayment decisions—how much of the loan to repay and when to make the payments—directly influence consumer debt levels. The authors examine how minimum required payment policy and loan information disclosed to consumers influence repayment decisions. They find that though presenting minimum required payment information has a negative impact on repayment decisions, increasing the minimum required level has a positive effect on repayment for most consumers. Experimental evidence from U.S. consumers shows that consumers’ propensity to pay the minimum required each month moderates these effects; U.K. credit card field data indicates that these effects are also moderated by borrowers’ credit limit and balance due. However, increasing the minimum level is unlikely to completely eliminate the negative effect of presenting minimum payment information. In addition, disclosing supplemental information, such as future interest cost and time needed to repay the loan, does not reduce the negative effects of including minimum payment information and has no substantial positive effect on repayments. This research offers new insights into the debt repayment process and has implications for consumers, lenders, and public policy. 

Author: Harris, A. J.  |  Lemon, K. N.  |  Matthews, W. J.  |  Navarro-Martinez, D.  |  Salisbury, L. C.  |  Stewart, N. 
Financial Decision: Selected Repayment Contribution 
Year: 2011
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

The Fewer the Better: Number of Goals and Savings Behaviour

This article examines the effect of the number of goals on consumers' savings behavior. Drawing from research on implementation intention, the authors show that under certain conditions, presenting a single savings goal leads to greater savings intention and actual savings than presenting multiple savings goals. Multiple goals typically evoke trade-offs among competing goals and thus increase the likelihood that people will remain in a deliberative mind-set and defer actions. In contrast, the authors pro pose and demonstrate that a single goal evokes a stronger implementation intention, which in turn has a greater effect on behavior change. They also show that the advantage of a single goal over multiple goals on saving is attenuated when saving is easier to implement or when the multiple savings goals are integrated rather than competing among themselves. Theoretical and practical implications are discussed. 

Author: Soman, D.  |  Zhao, M. 
Financial Decision: Total Savings Accumulated 
Year: 2011
Country: India 
Intervention: Goal Directed 
Intervention Area: Commitment Features 

The Fewer the Better: Number of Goals and Savings Behaviour

This article examines the effect of the number of goals on consumers' savings behavior. Drawing from research on implementation intention, the authors show that under certain conditions, presenting a single savings goal leads to greater savings intention and actual savings than presenting multiple savings goals. Multiple goals typically evoke trade-offs among competing goals and thus increase the likelihood that people will remain in a deliberative mind-set and defer actions. In contrast, the authors pro pose and demonstrate that a single goal evokes a stronger implementation intention, which in turn has a greater effect on behavior change. They also show that the advantage of a single goal over multiple goals on saving is attenuated when saving is easier to implement or when the multiple savings goals are integrated rather than competing among themselves. Theoretical and practical implications are discussed. 

Author: Soman, D.  |  Zhao, M. 
Financial Decision: Total Savings Accumulated 
Year: 2012
Country: India 
Intervention: Goal Directed 
Intervention Area: Commitment Features 

The Fewer the Better: Number of Goals and Savings Behaviour

This article examines the effect of the number of goals on consumers' savings behavior. Drawing from research on implementation intention, the authors show that under certain conditions, presenting a single savings goal leads to greater savings intention and actual savings than presenting multiple savings goals. Multiple goals typically evoke trade-offs among competing goals and thus increase the likelihood that people will remain in a deliberative mind-set and defer actions. In contrast, the authors pro pose and demonstrate that a single goal evokes a stronger implementation intention, which in turn has a greater effect on behavior change. They also show that the advantage of a single goal over multiple goals on saving is attenuated when saving is easier to implement or when the multiple savings goals are integrated rather than competing among themselves. Theoretical and practical implications are discussed. 

Author: Soman, D.  |  Zhao, M. 
Financial Decision: Savings Goal Selected 
Year: 2012
Country: Hong Kong 
Intervention: Goal Directed  |  Implementation Intention 
Intervention Area: Commitment Features 

The Fewer the Better: Number of Goals and Savings Behaviour

This article examines the effect of the number of goals on consumers' savings behavior. Drawing from research on implementation intention, the authors show that under certain conditions, presenting a single savings goal leads to greater savings intention and actual savings than presenting multiple savings goals. Multiple goals typically evoke trade-offs among competing goals and thus increase the likelihood that people will remain in a deliberative mind-set and defer actions. In contrast, the authors pro pose and demonstrate that a single goal evokes a stronger implementation intention, which in turn has a greater effect on behavior change. They also show that the advantage of a single goal over multiple goals on saving is attenuated when saving is easier to implement or when the multiple savings goals are integrated rather than competing among themselves. Theoretical and practical implications are discussed. 

Author: Soman, D.  |  Zhao, M. 
Financial Decision: Total Savings Accumulated 
Year: 2011
Country: Canada 
Intervention: Goal Directed  |  Implementation Intention 
Intervention Area: Commitment Features 

Knowing When to Spend: Unintended Financial Consequences of Earmarking to Encourage Savings

Maintaining savings is an important financial goal. Yet, there are times when savings should be spent; for example, when people face unavoidable costs and spending savings means avoiding high-interest rate debt. Existing behavioral research has focused on consumer decisions between savings and discretionary spending and has developed interventions to promote savings in these contexts. However, when spending is non-discretionary, these interventions risk exacerbating a pattern found in economic research that people borrow high-interest rate debt while maintaining savings earning low levels of interest. We examine how mental accounting interacts with considerations of personal responsibility and guilt to contribute to this pattern. Specifically, we explore whether people will spend savings in times when they need money most: emergencies. Across six studies, we find that people’s tendency to preserve savings in favour of borrowing from a high interest rate credit option varies as a function of the savings’ intended use. Paradoxically, people are most likely to turn to high interest rate credit under the belief that doing so is the responsible option. 

Author: O' Brien, R. L.  |  Sussman, A. B. 
Financial Decision: Selected Repayment Contribution 
Year: 2016
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Defaults 
Intervention Area: Default Choice Options 

Knowing When to Spend: Unintended Financial Consequences of Earmarking to Encourage Savings

Maintaining savings is an important financial goal. Yet, there are times when savings should be spent; for example, when people face unavoidable costs and spending savings means avoiding high-interest rate debt. Existing behavioral research has focused on consumer decisions between savings and discretionary spending and has developed interventions to promote savings in these contexts. However, when spending is non-discretionary, these interventions risk exacerbating a pattern found in economic research that people borrow high-interest rate debt while maintaining savings earning low levels of interest. We examine how mental accounting interacts with considerations of personal responsibility and guilt to contribute to this pattern. Specifically, we explore whether people will spend savings in times when they need money most: emergencies. Across six studies, we find that people’s tendency to preserve savings in favour of borrowing from a high interest rate credit option varies as a function of the savings’ intended use. Paradoxically, people are most likely to turn to high interest rate credit under the belief that doing so is the responsible option. 

Author: O' Brien, R. L.  |  Sussman, A. B. 
Financial Decision: Selected Repayment Contribution 
Year: 2016
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Earmarking 
Intervention Area: Commitment Features 

Participation and investment decisions in a retirement plan: the influence of colleagues' choices

This paper investigates whether peer effects play an important role in retirement savings decisions. We use individual data from employees of a large university to study whether individual decisions to enrol in a Tax Deferred Account plan sponsored by the university, and the choice of the mutual fund vendor for people who choose to enrol, are affected by he decisions of other employees in the same department. To overcome the identification problems, we divide the departments into sub-groups (along gender, status, age, and tenure lines) and we instrument the average participation of each peer group by the salary or tenure structure in this group. Our results suggest that peer effects may be an important determinant of savings decisions. 

Author: Duflo, E.  |  Saez, E. 
Financial Decision: Total Savings Accumulated 
Year: 2002
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Social Norms 
Intervention Area: Client Communication 

Minimum Payment Warnings and Information Disclosure Effects on Consumer Debt Repayment Decisions

Public policy makers encourage lenders to disclose loan cost information as a way of enabling borrowers to make more-informed debt repayment decisions. For example, current regulation requires credit card lenders to include a “minimum payment warning” on borrowers’ monthly statements, with the goal of encouraging borrowers to make larger monthly repayments each month and, consequently, decrease their debt levels. This research examines the effect of disclosing such information about future interest costs and time to pay off debt on consumers’ repayment decisions. The results indicate that disclosing information about the effects of repaying the minimum has little impact on repayment decisions. However, disclosing information about the effect of choosing an alternative course of action (i.e., a larger repayment amount) yielded a robust effect on repayment decisions. The findings suggest that cost information increases repayment amount for some borrowers, whereas time information may decrease repayment for others, especially those with little knowledge of interest compounding. This research provides some initial evidence of the impact of the CARD Act as well as that of similar regulations in Australia and Canada. 

Author: Salisbury, L. C. 
Financial Decision: Repayment of Outstanding Loan 
Year: 2014
Country: United States 
Product Type: Loans 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Minimum Payment Warnings and Information Disclosure Effects on Consumer Debt Repayment Decisions

Public policy makers encourage lenders to disclose loan cost information as a way of enabling borrowers to make more-informed debt repayment decisions. For example, current regulation requires credit card lenders to include a “minimum payment warning” on borrowers’ monthly statements, with the goal of encouraging borrowers to make larger monthly repayments each month and, consequently, decrease their debt levels. This research examines the effect of disclosing such information about future interest costs and time to pay off debt on consumers’ repayment decisions. The results indicate that disclosing information about the effects of repaying the minimum has little impact on repayment decisions. However, disclosing information about the effect of choosing an alternative course of action (i.e., a larger repayment amount) yielded a robust effect on repayment decisions. The findings suggest that cost information increases repayment amount for some borrowers, whereas time information may decrease repayment for others, especially those with little knowledge of interest compounding. This research provides some initial evidence of the impact of the CARD Act as well as that of similar regulations in Australia and Canada. 

Author: Salisbury, L. C. 
Financial Decision: Repayment of Outstanding Loan 
Year: 2014
Country: United States 
Product Type: Loans 
Product Category: Credit 
Intervention: Loss or Gain Framing  |  Anchoring 
Intervention Area: Pricing and Financial Benefits  |  Client Communication 

Savings, Sub goals, and Reference Points

Decision makers often save money for a specific goal by forgoing discretionary consumption and instead putting the money toward the savings goal. We hypothesized that reference points can be exploited to enhance this type of saving. In two hypothetical scenario studies, subjects made judgments of their likelihood to forgo a smaller expenditure in order to put the money toward the savings goal. In Experiment 1 judgments were higher if the savings goal was presented as composed of weekly sub goals (e.g., save $60 per week to buy a $180 iPod). Experiment 2 replicated this finding and demonstrated that the sub goal manipulation increased judgments of likelihood to save money only when the money saved from the foregone consumption would allow the decision maker to meet the weekly sub goal exactly (not under or overshoot it). These results suggest a reference point mechanism and point to ways that behavioural decision research can be harnessed to improve economic behaviours. 

Author: Chapman, G. B.  |  Colby, H. 
Financial Decision: Savings Goal Selected 
Year: 2013
Country: United States 
Product Type: Other Savings Product 
Product Category: Savings 
Intervention: Anchoring 
Intervention Area: Client Communication 

Savings, Sub goals, and Reference Points

Decision makers often save money for a specific goal by forgoing discretionary consumption and instead putting the money toward the savings goal. We hypothesized that reference points can be exploited to enhance this type of saving. In two hypothetical scenario studies, subjects made judgments of their likelihood to forgo a smaller expenditure in order to put the money toward the savings goal. In Experiment 1 judgments were higher if the savings goal was presented as composed of weekly sub goals (e.g., save $60 per week to buy a $180 iPod). Experiment 2 replicated this finding and demonstrated that the sub goal manipulation increased judgments of likelihood to save money only when the money saved from the foregone consumption would allow the decision maker to meet the weekly sub goal exactly (not under or overshoot it). These results suggest a reference point mechanism and point to ways that behavioural decision research can be harnessed to improve economic behaviours. 

Author: Chapman, G. B.  |  Colby, H. 
Financial Decision: Savings Goal Selected 
Year: 2013
Country: United States 
Product Type: Other Savings Product 
Product Category: Savings 
Intervention: Anchoring 
Intervention Area: Client Communication 

Nudging credit scores in the field: the effect of text reminders on creditworthiness in the United States

In this paper we present evidence from a field experiment on the effect of text message reminders and credit card APR (annual payment rate) information on credit scores of low-to- moderate-income individuals. We find that individuals who initially had a low credit score benefited significantly from receiving the text reminders, while individuals who initially had a mid or high score did not. The positive effect on low-score individuals stems from the reduction of debt and better payment patterns. For mid-score individuals, we find a positive effect on payment patterns but no effect on credit scores; this may be because a better payment pattern is slower than a worse payment pattern to affect a credit score. For initially high-credit score individuals, we find a negative effect on credit scores, due to higher collection accounts. As for APR information, we find only sporadic effects: it helped reduce the number of inquiries for low-score individuals and reduce collection accounts of mid-score individuals, yet it contributed to greater past-due balances of high-score individuals. 

Author: Bracha, A.  |  Meier, S. 
Year: 2014
Country: United States 
Product Type: Credit Card 
Product Category: Credit 
Intervention: SMS Reminders  |  Social Norms 
Intervention Area: Client Communication 

The Effect of Payment Transparency on Consumption: Quasi-Experiments from the Field

Recent research suggests that the method of making a payment can influence the willingness to pay and consumption behavior. In this manuscript, we argue that payment mechanisms differ from each other along the dimensions of transparency, and that the degree of transparency correlates positively with the pain of paying using the mechanism, and negatively with consumption and spending. We replicate previous experimental results using quasi-experiments from the field, and find that the lower the payment transparency, the greater is the consumption. However, this effect is weak for products whose consumption rates are inflexible. 

Author: Soman, D. 
Financial Decision: Payment Amount 
Year: 2003
Country: United States 
Product Type: Prepaid Card 
Product Category: Payments 

The Effect of Payment Transparency on Consumption: Quasi-Experiments from the Field

Recent research suggests that the method of making a payment can influence the willingness to pay and consumption behavior. In this manuscript, we argue that payment mechanisms differ from each other along the dimensions of transparency, and that the degree of transparency correlates positively with the pain of paying using the mechanism, and negatively with consumption and spending. We replicate previous experimental results using quasi-experiments from the field, and find that the lower the payment transparency, the greater is the consumption. However, this effect is weak for products whose consumption rates are inflexible. 

Author: Soman, D. 
Financial Decision: Payment Amount 
Year: 2003
Country: United States 
Product Type: Prepaid Card 
Product Category: Payments 
Intervention: Salience 
Intervention Area: Not Specified 

The Effect of Payment Transparency on Consumption: Quasi-Experiments from the Field

Recent research suggests that the method of making a payment can influence the willingness to pay and consumption behavior. In this manuscript, we argue that payment mechanisms differ from each other along the dimensions of transparency, and that the degree of transparency correlates positively with the pain of paying using the mechanism, and negatively with consumption and spending. We replicate previous experimental results using quasi-experiments from the field, and find that the lower the payment transparency, the greater is the consumption. However, this effect is weak for products whose consumption rates are inflexible. 

Author: Soman, D. 
Financial Decision: Payment Amount 
Year: 2003
Country: United States 
Product Type: Cheque Book  |  Credit Card 
Product Category: Credit 
Intervention: Salience 
Intervention Area: Not Specified 

Using Goals to Boost Savings

None 

Author: Common Cents Lab 
Financial Decision: Savings Goal Reached 
Year: 2016
Country: United States 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Reminders 
Intervention Area: Client Communication 

Increasing Access to Good Debt (Kiva)

None 

Author: Common Cents Lab 
Financial Decision: Enrolment 
Year: 2016
Country: United States 
Product Type: Loans 
Product Category: Credit 
Intervention: Standard Incentives 
Intervention Area: Pricing and Financial Benefits 

Pay Off Loans Faster - Earn up

None 

Author: Common Cents Lab 
Financial Decision: Enrolment 
Year: 2016
Country: United States 
Product Type: Mortgage Loans 
Product Category: Credit 
Intervention: Loss or Gain Framing 
Intervention Area: Pricing and Financial Benefits 

Effects of Financial Access of Savings by Low-Income People

This paper assesses the impact of increasing financial access on low-income people savings. Effects on households’ saving rates and on different informal savings instruments are considered. The paper uses an exogenous expansion of a Mexican savings institute, targeted to low-income people, as a natural experiment and the 1992 and 1994 National Surveys of Income and Expenditures. Results show that the expansion increased the average saving rate of affected households by more than 3 to almost 5 percentage points. The effect was even higher for the poorest households in the sample: their saving rate increased by more than 7 percentage points in some cases. Furthermore, the expansion, in general, had no effect on high-income households. In the case of informal savings instruments, evidence of crowding out of these instruments caused by the expansion is limited. Results do not rule out the possibility that a considerable fraction of the increase in households’ savings could have come from new savings. 

Author: Aportela, F. 
Financial Decision: Contribution Levels 
Year: 1999
Country: Mexico 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Earmarking 
Intervention Area: Commitment Features 

Remembering to Pay? Reminders vs. Financial Incentives for Loan Payments

We report the results from a field experiment with a micro lender in Uganda to test the effectiveness of privately implemented incentives for loan repayment. Using a randomized control trial we measure the impact of three different treatments: Borrowers are either given a lump sum cash reward upon completion of the loan (equivalent to a 25% interest rate reduction on the current loan), a 25% reduction of the interest rate in the next loan the borrower takes from the bank, or a monthly text message reminder before the loan payment is due (SMS). We find that on average the size of the treatment effect is similar across all the treatment groups: borrowers in the treatment groups have a 7-9% increase in the probability of paying on time and the average days late drop by 2 days a month. The results suggest that simple text messages which help borrowers to better manage their repayment dates have similar effects as large changes in the cost of capital of 25% of interest. The impact of the cash back incentives are stronger for customers with smaller loans and less banking experience, the reduced future interest rate seemed to be most effective for customers with larger loans, while the SMS text messages were particularly effective for younger customers. 

Author: Cadena, X.  |  Schoar, A. 
Financial Decision: Repayment of Outstanding Loan 
Year: 2011
Country: Uganda 
Product Type: MFI Loans 
Product Category: Credit 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

Small Cues Change Savings Choices

We present evidence from field experiments that savings choices are significantly affected by numerical cues in the environment, even when these cues are at best minimally informative. We randomized the one- or two-sentence savings cues present in emails to employees about their 401(k) savings plan. High savings cues increased 401(k) contribution rates by up to 2.9% of income in a pay period, and low savings cues decreased 401(k) contribution rates by up to 1.4% of income in a pay period. Cues affected 401(k) contribution rates for up to a year after the email. 

Author: Choi, J. J.  |  Haisley, E.  |  Kurkoski, J.  |  Massey, C. 
Financial Decision: Contribution Levels 
Year: 2013
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Loss or Gain Framing 
Intervention Area: Pricing and Financial Benefits 

The Persistent Power of Behavioural Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor

I use a field experiment in rural Kenya to study how temporary incentives to save impact long-run economic outcomes. Study participants randomly selected to receive large temporary interest rates on an individual bank account had significantly more income and assets 2.5 years after the interest rates expired. These changes are much larger than the short-run impacts on experimental bank account use and almost entirely driven by growth in entrepreneurship. Temporary interest rates directed to joint bank accounts had no detectable long-run impacts on entrepreneurship or income, but increased investment in household public goods and spousal consensus over finances. 

Author: Schaner, S. 
Financial Decision: Total Savings Accumulated 
Year: 2016
Country: Kenya 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Discounting 
Intervention Area: Pricing and Financial Benefits 

What will my account really be worth

Recent findings on limited financial literacy and exponential growth bias suggest saving decisions may not be optimal because such decisions require an accurate understanding of how current contributions can translate into income in retirement. This study uses a large-scale field experiment to measure how a low-cost, direct-mail intervention designed to inform subjects about this relationship affects their saving behavior. Using administrative data prior to and following the intervention, we measure its effect on participation and the level of contributions in retirement saving accounts. Those sent income projections along with enrollment information were more likely to change contribution levels and increase annual contributions relative to the control group. Among those who made a change in contribution, the increase in annual contributions was approximately $1,150. Results from a follow-up survey corroborate these findings and show heterogeneous effects of the intervention by rational and behavioral factors known to affect saving. Finally, we find evidence of behavioral influences on decision-making in that the assumptions used to generate the projections influence the saving response. 

Author: Goda, G. S.  |  Manchester, C. F.  |  Sojourner, A. 
Financial Decision: Contribution Levels 
Year: 2012
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Social Norms 
Intervention Area: Client Communication 

Saving More to Borrow Less: Experimental Evidence from Access to Formal Savings Accounts in Chile

Poverty is often characterized not only by low and unstable income, but also by heavy debt burdens. We find that reducing barriers to saving through access to free savings accounts decreases participants' short-term debt by about 20%. In addition, participants who experience an economic shock have less need to reduce consumption, and subjective well-being improves significantly. Precautionary savings and credit therefore act as substitutes in providing self-insurance, and participants prefer borrowing less when a free formal savings account is available. Take-up patterns suggest that requests by others for participants to share their resources may be a key obstacle to saving. 

Author: Kast, F.  |  Pomeranz, D. 
Financial Decision: Enrolment 
Year: 2014
Country: Chile 
Product Type: Savings Account 
Product Category: Savings 
Intervention: Discounting 
Intervention Area: Pricing and Financial Benefits 

Framing and the annuitization decision: Experimental evidence from a Dutch pension fund

We report the effects of framing and default settings in annuity demand after conducting a survey-based experiment with over 3,000 members of a Dutch occupational pension plan. The participants were asked to allocate their real projected pension accrual between a life annuity and a partial lump sum. In particular, we investigated the joint effects of consumption and investment frames and gain and loss frames. We present strong evidence for framing and default setting effects in annuity demand. We also find robust evidence of individual characteristics of influence annuity demand, highlighting the importance of heterogeneity among participants. Framing and default effects remain significant when we control for individual characteristics. We conclude Dutch plan members generally welcome the partial lump sum option over full annuitization. Framing and default settings are generally capable of predictively steering annuity demand. The precise effect framing may have also depends on the institutional environment, which predefines the perspective through which individuals filter annuities. 

Author: Bockweg, C.  |  Ponds, E.  |  Steenbeek, O.  |  Vonken, J. 
Financial Decision: Savings Goal Selected 
Year: 2016
Country: Holland 
Product Type: Pension 
Product Category: Savings 
Intervention: Loss or Gain Framing 
Intervention Area: Pricing and Financial Benefits 

Get Your Goat: Planning, Saving, and Ceremonial Spending

Providing “nudges” or simple reminders is increasingly seen as a way to help households overcome behavioral biases. We conducted a randomized evaluation in Niger of interventions designed to assist households in planning for spending on religious ceremonies: a lockbox, SMS reminders about savings goals and a combination of the two. These interventions had no impact on household expenditures for religious festivals or other ceremonies, such as weddings, naming ceremonies or funerals. Nevertheless, they shifted the financial mechanisms that households used to pay for some of these events towards savings. The SMS interventions allowed households to increase their overall savings amounts, whereas the lockbox interventions allowed households to better meet certain savings goals, increase health expenditures and reduce food insecurity. These effects differ substantially between men and women, suggesting that the cooperative bargaining model may not hold. 

Author: Aker, J. C.  |  Goldstein, M.  |  McConnell, M.  |  O'Sullivan, M.  |  Sawyer, M. 
Financial Decision: Total Savings Accumulated 
Year: 2016
Country: Niger 
Product Type: Lock Box 
Product Category: Savings 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

SEED: A commitment savings product in the Philippines

Microfinance institutions in developing countries increasingly offer a variety of savings products. Yet few studies have investigated the impact that savings product designs have on client savings levels. Since savings levels are generally considered to be low—from both client and institutional perspectives—this relationship must be better understood. With this in mind, we undertook an experimental “action research” project to study how the design of a savings product influences both the type of client attracted to the product and the impact the product has on financial savings. We first designed a prototype savings account with novel commitment features. We then observed its effects using an experimental evaluation design. We were especially interested in gathering evidence to answer the following questions: 1. Would those who chose to open this account share certain characteristics? More specifically, would this product help people who expressed a desire to save but had a difficult time doing so due to lack of self-control (i.e., difficulty avoiding temptation to spend cash in pocket) or spousal-control issues (i.e., difficulty keeping funds in the household away from their spouse)? 2. Does opening this new type of account cause an increase in the total financial savings of the client? That is, do the features we have included in the account actually work to help households increase their savings? The findings of this study have implications beyond the effect the product had on the lives of these particular individuals. Because we employed a rigorous experimental research design with random assignment of participants to treatment and control groups, we know that any increase in savings is a direct result of the product. We find a strong effect on savings that we can attribute to the product: after twelve months, average bank account balances increased by 80 percent on average for all who were assigned to the treatment group compared to those assigned to the control group. Those in the treatment group who actually opened the commitment savings product increased savings after twelve months by 337 percent. 

Author: Ashraf, N.  |  Karlan, D.  |  Yin, W. 
Financial Decision: Enrolment  |  Total Savings Accumulated 
Year: 2004
Country: Philippines 
Product Type: Savings Account 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Savings and prize-linked savings accounts

Many households have insufficient savings to handle moderate and routine consumption shocks. Many of these financially-fragile households also have the highest lottery expenditures as a proportion of income. This combination suggests that Prize-Linked Savings (PLS) accounts, combining security of principal with lottery-type jackpots, can increase savings among these at-risk households. Results from an online experiment show that the introduction of PLS accounts increase total savings and reduce lottery expenditures significantly, especially among individuals with the lowest levels of savings and income. The results imply that PLS accounts offer a plausible market-based solution to encourage individuals to increase savings 

Author: Atalay, K.  |  Bakhtiar, F.  |  Cheung, S. L.  |  Slonim, R. 
Financial Decision: Total Savings Accumulated 
Year: 2013
Country: United States 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Incentives  |  Prize-Linked 
Intervention Area: Pricing and Financial Benefits 

Price and Information Type in Life Microinsurance Demand: Experimental Evidence from Mexico

Poor households in developing countries face large and varied risks, but often have inadequate informal tools to manage them. Microinsurance is being developed to create a better alternative, and it should--in theory--be in high demand. Yet take-up of microinsurance remains low. I study the impact of price and information on the demand for life microinsurance among microfinance borrowers of Compartamos in Mexico. I randomly assigned 8,700 borrowers to two of four treatments: (I) no longer receive a base amount of subsidized insurance coverage (high price) or keep the subsidy (low price), and (ii) being informed with a message emphasizing the financial toll of a funeral and how the insurance payoff helps to face it (financial information) or information emphasizing the emotional toll of a funeral on the surviving family (emotional information). On average, eliminating the subsidy led to a decrease in insurance coverage, but the two messages did not impact coverage. The impacts are heterogeneous, however. Although all borrowers decreased their coverage as the subsidy was eliminated, younger borrowers. presented with the emotional information were less likely to drop coverage than their counterparts presented with the financial information. The impact was reversed for middle-aged borrowers: the financial information led to a smaller drop in coverage following the elimination of the subsidy. The findings add to the literature on how information drives behavior in developing countries, and suggest that specific information provided at the time of choice was critical to help borrowers make a decision regarding a risk management strategy. 

Author: Bauchet, J. 
Financial Decision: Cover Level Selected 
Year: 2014
Country: Mexico 
Product Type: Life Insurance 
Product Category: Insurance 
Intervention: Discounting 
Intervention Area: Pricing and Financial Benefits 

Savings Monitors

We conduct a field experiment in India to explore two interventions to help individuals to increase their savings balances. First, we design a financial product based on the popular business correspondent model, which includes frequent reminders, assistance in account opening, and the setting of a six-month savings goal. Second, we measure the effectiveness of adding a peer monitoring component to this basic bundle and test whether the local social network can help to increase the penetration of the formal banking system. We ask whether having a monitor substitutes for a formal commitment device, whether individuals choose the most effective monitors, and moreover, whether some community members are better than others at encouraging financial capability. 

Author: Breza, E.  |  Chandrasekhar, A. 
Financial Decision: Total Savings Accumulated 
Year: 2014
Country: India 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Impact of Bank Accounts on Migrant Savings and Remittances: Evidence from a Field Experiment

We use a randomized field experiment to estimate the effect of having a United States bank account on Mexican migrants’ savings and remittances. With support from the Mexican Consulate and a local bank targeting Hispanic clientele, we randomly assigned assistance in obtaining a matrícula consular card, which we call “treatment.” This consulate-issued identification card is accepted by many U.S. financial institutions for the purpose of establishing identity for new accounts, and has little other use in the small U.S. city where we conduct the experiment. Treated migrants were 38 percentage points more likely to open a U.S. bank account, increased their savings as a share of income by 9 percentage points and decreased their remittances to Mexico as a share of income by 6 percentage points. There is heterogeneity of treatment effects by migrants’ reported degree of control over how their remittances are allocated in Mexico. Among migrants who report having no control (as opposed to shared or sole control), treatment causes a higher take-up of U.S. bank accounts, a larger increase in total savings, a shift away from Mexico savings toward U.S. savings, and an increase in income. These results suggest that extending bank access can raise savings in a low-income minority population. Additionally, they suggest that issues of control alter intrahousehold resource allocations and income, which rejects the unitary model and even the collective model for characterizing decision-making in these Mexican migrant households. 

Author: Chin, A.  |  Karkoviata, L.  |  Wilcox, N. 
Financial Decision: Enrolment  |  Payment Amount 
Year: 2011
Country: United States 
Product Type: Bank Account  |  Remittances 
Product Category: Savings  |  Payments 
Intervention: Earmarking 
Intervention Area: Commitment Features 

An Experiment on Information Use in College student Loan Decisions [SG]

There is ample concern that college students are making ill-informed student loan decisions with potentially negative consequences to themselves and the broader economy. This paper reports the results of a randomized field experiment in which college students are provided salient information about their borrowing choices. The setting is a large flagship public university in the Midwest, and the sample includes all nongraduating students who previously borrowed student loan money (~10,000 students). Half of the students received individually tailored letters with simplified information about future monthly payments, cumulative borrowing, and the typical borrowing of peers; the other half is the control group that received no additional information. There are at most modest effects of the letter overall, which suggests that information alone is not sufficient to drive systematically different borrowing choices among students. However, some key student subgroups changed their borrowing in response to the letter, particularly those with low GPAs. There is also evidence of intended (more contact with financial aid professionals) and unintended (lower Pell Grant receipt) consequences of the letter. 

Author: Darolia, R. 
Financial Decision: Enrolment  |  Selected Loan Amount 
Year: 2016
Country: United States 
Product Type: Student Loans 
Product Category: Savings 
Intervention: Social Norms 
Intervention Area: Client Communication 

Mental Accounting and Mobile Banking: Can labeling an M-PESA account increase savings?

Working with a sample of vulnerable women in Kenya, we conduct a field experiment involving a savings intervention consisting of a labeled mobile banking (M-PESA) account, savings goal setting, and text message reminders. The effect of the intervention on savings is positive but imprecisely estimated. The intervention did lead to statistically significant increases in savings for those who report having problems saving due to spending on temptation goods. In addition, individuals with temptation constraints to savings spent less on temptation goods as a result of the intervention. We provide suggestive evidence that the increase in savings for those facing temptation constraints was most likely due to the labeled M-PESA account. This suggests that the labeling of a mobile banking savings account may induce mental accounting and can relax temptation constraints to savings. 

Author: Dizon, F.  |  Gong, E.  |  Jones, K. 
Financial Decision: Total Savings Accumulated 
Year: 2015
Country: Kenya 
Product Type: M-PESA 
Product Category: Payments 

Group versus individual liability: A field experiment in the Philippines

Group liability is often portrayed as the key innovation that led to the explosion of the microcredit movement, which grew with the Grameen Bank in the 1970s and continues on today with hundreds of institutions around the world. Group liability claims to improve repayment rates and lower transaction costs when lending to the poor by providing incentives for peers to screen, monitor and enforce each other’s loans. However, some argue that group liability creates excessive pressure and discourages good clients from borrowing, jeopardizing both growth and sustainability. Therefore, it remains unclear whether group liability improves the lender’s overall profitability and the poor’s access to financial markets. We worked with a bank in the Philippines to conduct a field experiment to examine these issues. Working with 169 previously formed group liability centers of approximately twenty women, we converted half to individual-liability centers (treatment) and kept the other half as-is with group liability (control). The weekly group meetings still occurred; only the group liability is removed. After one year, we find no increase in default and we find higher outreach due to more new clients joining the treatment groups. 

Author: Giné, X.  |  Karlan, D. 
Financial Decision: Enrolment 
Year: 2007
Country: Philippines 
Product Type: MFI Loans 
Product Category: Credit 
Intervention: Social Norms 
Intervention Area: Client Communication 

Endowment Effects and Usage of Financial Products: Evidence from Malawi

Savings account holders are significantly less likely to switch to another, cheaper account, compared to new clients given a choice between the two accounts. While 42 percent of account holders retained their original, expensive accounts, none of the new clients chose the expensive accounts. We exploit previous experimental variation in account usage and find that account holders that used their account more frequently are more likely to switch. This suggests that induced familiarity with the account can mitigate the endowment effect. 

Author: Giné, X.  |  Goldberg, J. 
Financial Decision: Enrolment 
Year: None
Country: Malawi 
Product Type: Bank Account 
Product Category: Savings 

Informing and Improving Retirement Saving Performance using Behavioural Economics Theory-driven User Interfaces

Can human-computer interaction help people make informed and effective decisions about their retirement savings? We applied the behavioral economic theories of endowment effect and loss aversion to the design of novel retirement saving user interfaces. To examine effectiveness, we conducted an experiment in which 487 participants were exposed to one of three experimental user interface designs of a retirement saving simulator, representing endowment effect, loss aversion and control. Users made 34 yearly asset allocation decisions. We found that designs informed by the endowment effect and loss aversion theories and which communicated to savers the long-term implications of their asset allocation choices, led users to adjust their behavior, make larger and more frequent asset allocation changes, and achieve their saving goals more effectively. 

Author: Gunaratne, J.  |  Nov, O. 
Financial Decision: Savings Goal Reached 
Year: 2015
Country: United States 
Product Type: Pension 
Product Category: Savings 
Intervention: Loss or Gain Framing 
Intervention Area: Pricing and Financial Benefits 

Saving More in Groups: Field Experimental Evidence from Chile

We test the impact of a peer group savings program on precautionary savings, through two randomized field experiments among 2,687 microcredit clients. The first experiment finds that the Peer Group Treatment, which combines public goal setting, monitoring in the group, and non-financial rewards, increases savings in a new savings account significantly. The number of deposits grows 3.7-fold, and the average savings balance almost doubles. In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants and raises the savings balance only for the very top of the distribution. A second experiment, conducted a year later, tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages, without meetings, rewards, or peer pressure. 

Author: Kast, F.  |  Meier, S.  |  Pomeranz, D. 
Financial Decision: Enrolment  |  Total Savings Accumulated 
Year: 2016
Country: Chile 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Commitment Devices  |  Prize-Linked 
Intervention Area: Commitment Features  |  Pricing and Financial Benefits 

Saving More in Groups: Field Experimental Evidence from Chile

We test the impact of a peer group savings program on precautionary savings, through two randomized field experiments among 2,687 microcredit clients. The first experiment finds that the Peer Group Treatment, which combines public goal setting, monitoring in the group, and non-financial rewards, increases savings in a new savings account significantly. The number of deposits grows 3.7-fold, and the average savings balance almost doubles. In contrast, a more classical measure, a substantially increased interest rate, has no effect for most participants and raises the savings balance only for the very top of the distribution. A second experiment, conducted a year later, tests an alternative delivery mechanism and shows that effects of similar size can be achieved through feedback text messages, without meetings, rewards, or peer pressure. 

Author: Kast, F.  |  Meier, S.  |  Pomeranz, D. 
Financial Decision: Enrolment  |  Total Savings Accumulated 
Year: 2016
Country: Chile 
Product Type: Bank Account 
Product Category: Savings 
Intervention: SMS Reminders 
Intervention Area: Client Communication 

The Cost of Convenience? Transaction Costs, Bargaining Power, and Savings Account Use in Kenya

Individuals across the world often use high-transaction-cost savings devices, even when lower-cost technologies are available. I study this phenomenon via a field experiment where access to ATM cards was randomly assigned to 1,100 newly opened bank accounts in rural Kenya. These cards reduced withdrawal fees by over 50 percent. While the cards increased overall account use, the positive treatment effect is entirely driven by joint and male-owned accounts – in contrast, the treatment had no impact on use of women’s accounts. I find evidence that one important driver of this difference is intrahousehold concerns. 

Author: Schaner, S. 
Financial Decision: Total Savings Accumulated 
Year: 2016
Country: Kenya 
Product Type: ATM Card 
Product Category: Savings 
Intervention: Defaults  |  Discounting 
Intervention Area: Default Choice Options  |  Pricing and Financial Benefits 

The Cost of Anchoring on Credit-Card Minimum Repayments

None 

Author: Stewart, N. 
Financial Decision: Selected Repayment Contribution 
Year: 2009
Country: United Kingdom 
Product Type: Credit Card 
Product Category: Credit 
Intervention: Anchoring 
Intervention Area: Client Communication 

Examining the effect of expressing a quantitative goal on consumer savings

We examine the effectiveness of implementation intention plans for achieving regular savings with small-scale, exploratory field research. A series of surveys required participants in a community-based savings campaign to form implementation intentions concerning timing, mode, amount, and source of income for savings during the next month. Baseline and two follow-up responses from treatment and control groups showed implementation plans that require individuals to express discretionary quantitative savings goals are less effective than those that require a generalized, nonquantitative commitment to save. This result has implications for savings programs, many of which consider an expressed quantitative goal to be crucial for success. 

Author: Loibl, C.  |  Scharff, R. L. 
Financial Decision: Savings Goal Reached 
Year: 2010
Country: United States 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Implementation Intention 
Intervention Area: Commitment Features 

Prices or knowledge? What drives demand for financial services in emerging markets?

Financial development is critical for growth, but its micro-determinants are not understood. We test leading theories of low demand for financial services in emerging markets, combining novel survey evidence from Indonesia and India with experiment. We find a strong correlation between financial literacy and behaviour. However, a financial education program has modest effects, increasing demand bank accounts only for those with limited education or financial literacy. In contrast, small subsidies greatly increase demand. A follow-up survey confirms these findings, demonstrating that newly opened accounts remain open and in use 2 years after intervention. 

Author: Cole, S.  |  Sampson, T.  |  Zia, B. 
Financial Decision: Enrolment 
Year: 2011
Country: India 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Standard Incentives 
Intervention Area: Pricing and Financial Benefits 

Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current trade-offs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product. 

Author: Ashraf, N.  |  Karlan, D.  |  Yin, W. 
Financial Decision: Total Savings Accumulated 
Year: 2006
Country: Philippines 
Product Type: Lock Box 
Product Category: Savings 
Intervention: Goal Directed 
Intervention Area: Commitment Features 

Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines

We designed a commitment savings product for a Philippine bank and implemented it using a randomized control methodology. The savings product was intended for individuals who want to commit now to restrict access to their savings, and who were sophisticated enough to engage in such a mechanism. We conducted a baseline survey on 1777 existing or former clients of a bank. One month later, we offered the commitment product to a randomly chosen subset of 710 clients; 202 (28.4 percent) accepted the offer and opened the account. In the baseline survey, we asked hypothetical time discounting questions. Women who exhibited a lower discount rate for future relative to current trade-offs, and hence potentially have a preference for commitment, were indeed significantly more likely to open the commitment savings account. After twelve months, average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group. We conclude that the savings response represents a lasting change in savings, and not merely a short-term response to a new product. 

Author: Ashraf, N.  |  Karlan, D.  |  Yin, W. 
Financial Decision: Enrolment 
Year: 2006
Country: Philippines 
Product Type: Lock Box 
Product Category: Savings 

Commitment Savings Products: Theory and Evidence

Recent literature promotes commitment products as a new remedy for overcoming self-control problems and savings constraints. This thesis argues that the effects of commitment may be very heterogeneous, and highlights the mechanisms under which commitment may reduce welfare, rather than increase it. It also examines a new type of commitment contract: A formal commitment savings account with fixed regular instalments, introduced in a developing-country context. Chapter 1 proposes that the popularity of costly or inflexible savings mechanisms as well as of high-interest consumption loans may represent a demand for commitment to fixed instalments. Using a newly collected dataset from Bangladesh, it shows that the introduction of a regular-instalment commitment savings product was associated with a large increase in average savings contributions. The theoretical framework in Chapter 2 highlights the potential heterogeneity behind such positive average effects: Commitment improves welfare when agents have full knowledge of their preferences, including biases and inconsistencies. If agents are imperfectly informed about their preferences, they may choose ill-suited commitment contracts. I formally show that commitment contracts can reduce welfare if the commitment is not strong enough to discipline the agent, resulting in costly default. I further show that such insufficient commitment contracts are likely to be selected by time-inconsistent agents with ‘partially sophisticated’ preferences: Agents who are neither completely unaware nor fully aware of their time-inconsistency, but anywhere in between those two extremes. Chapter 3 describes a randomised experiment in the Philippines: I designed and introduced a regular-instalment commitment savings product, intended to improve on pure withdrawal-restriction products by mimicking the fixed-instalment nature of loan repayment contracts. Individuals from a general low-income population were randomly offered to take up the product, and were asked to choose the stakes of the contract (in the form of a default penalty) themselves. The result is that a majority appears to choose a harmful contract: While the intent-to-treat effect on bank savings for individuals assigned to the treatment group is four times that of a withdrawal-restriction product (offered as a control treatment), 55 percent of clients default on their savings contract. The explanation most strongly supported by the data is that the chosen stakes were too low (the commitment was too weak) to overcome clients’ self-control problems. Moreover, both take-up and default are negatively predicted by measures of sophisticated hyperbolic discounting, suggesting that those who are fully aware of their bias realise the commitment is too weak for them, and avoid the product. The study suggests that research on new commitment products should carefully consider the risk of adverse welfare effects, particularly for naïve and partially sophisticated hyperbolic discounters. 

Author: Hofmann, A. 
Financial Decision: Total Savings Accumulated 
Year: 2014
Country: Bangladesh 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Commitment Savings Products: Theory and Evidence

Recent literature promotes commitment products as a new remedy for overcoming self-control problems and savings constraints. This thesis argues that the effects of commitment may be very heterogeneous, and highlights the mechanisms under which commitment may reduce welfare, rather than increase it. It also examines a new type of commitment contract: A formal commitment savings account with fixed regular instalments, introduced in a developing-country context. Chapter 1 proposes that the popularity of costly or inflexible savings mechanisms as well as of high-interest consumption loans may represent a demand for commitment to fixed instalments. Using a newly collected dataset from Bangladesh, it shows that the introduction of a regular-instalment commitment savings product was associated with a large increase in average savings contributions. The theoretical framework in Chapter 2 highlights the potential heterogeneity behind such positive average effects: Commitment improves welfare when agents have full knowledge of their preferences, including biases and inconsistencies. If agents are imperfectly informed about their preferences, they may choose ill-suited commitment contracts. I formally show that commitment contracts can reduce welfare if the commitment is not strong enough to discipline the agent, resulting in costly default. I further show that such insufficient commitment contracts are likely to be selected by time-inconsistent agents with ‘partially sophisticated’ preferences: Agents who are neither completely unaware nor fully aware of their time-inconsistency, but anywhere in between those two extremes. Chapter 3 describes a randomised experiment in the Philippines: I designed and introduced a regular-instalment commitment savings product, intended to improve on pure withdrawal-restriction products by mimicking the fixed-instalment nature of loan repayment contracts. Individuals from a general low-income population were randomly offered to take up the product, and were asked to choose the stakes of the contract (in the form of a default penalty) themselves. The result is that a majority appears to choose a harmful contract: While the intent-to-treat effect on bank savings for individuals assigned to the treatment group is four times that of a withdrawal-restriction product (offered as a control treatment), 55 percent of clients default on their savings contract. The explanation most strongly supported by the data is that the chosen stakes were too low (the commitment was too weak) to overcome clients’ self-control problems. Moreover, both take-up and default are negatively predicted by measures of sophisticated hyperbolic discounting, suggesting that those who are fully aware of their bias realise the commitment is too weak for them, and avoid the product. The study suggests that research on new commitment products should carefully consider the risk of adverse welfare effects, particularly for naïve and partially sophisticated hyperbolic discounters. 

Author: Hofmann, A. 
Financial Decision: Total Savings Accumulated 
Year: 2014
Country: Philippines 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

The ABCs of Financial Literacy–Experimental Evidence on Attitudes, Behavior and Cognitive Biases

This paper uses a large-scale field experiment in India to study attitudinal, behavioural, and cognitive constraints that stymie the link between financial education and financial outcomes. The study complements financial education with (I) participant classroom motivation with pay for performance on a knowledge test, (ii) intensity of treatment with personalized financial counselling, and (iii) behavioural nudges with financial goal setting. The analysis finds no impact of pay for performance but significant effects of both counselling and goal setting on real financial outcomes. These results identify important com­plements to financial education that can bridge the gap between financial knowledge and financial behaviour change. 

Author: Carpena, F.  |  Cole, S.  |  Shapiro, J.  |  Zia, B. 
Financial Decision: Enrolment 
Year: 2011
Country: India 
Product Type: Life Insurance  |  Savings Account  |  Loans 
Product Category: Insurance  |  Savings  |  Credit 
Intervention: Goal Directed 
Intervention Area: Commitment Features 

Harnessing Emotional Connections to Improve Financial Decisions

This paper exploits the emotional connections and viewer attentiveness of mainstream media to evaluate the economic impact of financial education messages on debt management delivered through a popular television soap opera in South Africa. The study uses a symmetric encouragement design to compare outcomes of individuals who were randomly assigned to watch a soap opera with financial messages, “Scandal!” to those of individuals who were invited to watch a similar soap opera without financial messages, “Muvhango.” Both shows overlapped in evening primetime and had similar past viewership profiles. The financial storyline spanned two months and featured one of the leading characters of the show borrowing excessively and irresponsibly through hire-purchase, gambling, and ending up in financial distress; and eventually seeking help to find her way out. Two intermediate and one final follow-up surveys were conducted as part of the study. The analysis finds individuals assigned to watch Scandal had significantly higher financial knowledge of the issues highlighted in the soap opera storyline, in particular messages delivered by the leading character. On behavior, Scandal viewers were almost twice more likely to borrow from formal sources, less likely to engage in gambling, and less prone to enter hire purchase agreements. Messages promoting a national debt mediation helpline delivered by an external character did not sustain traction beyond immediate interest. Three qualitative focus groups highlight the importance of emotional connections with the leading character in motivating behavior change. 

Author: Berg, G.  |  Zia, B. 
Financial Decision: Enrolment 
Year: 2013
Country: South Africa 
Product Type: Loans 
Product Category: Credit 
Intervention: Affect 
Intervention Area: Client Communication 

Commitments to save: A field experiment in rural Malawi

This paper reports the results of a field experiment that randomly assigned smallholder cash crop farmers formal savings accounts. In collaboration with a microfinance institution in Malawi, the authors tested two primary treatments, offering either: 1) “ordinary” accounts, or 2) both ordinary and “commitment” accounts. Commitment accounts allowed customers to restrict access to their own funds until a future date of their choosing. A control group was not offered any account but was tracked alongside the treatment groups. Only the commitment treatment had statistically significant effects on subsequent outcomes. The effects were positive and large on deposits and withdrawals immediately prior to the next planting season, agricultural input use in that planting, crop sales from the subsequent harvest, and household expenditures in the period after harvest. Across the set of key outcomes, the commitment savings treatment had larger effects than the ordinary savings treatment. Additional evidence suggests that the positive impacts of commitment derive from keeping funds from being shared with one’s social network. 

Author: Brune, L.  |  Giné, X.  |  Goldberg, J.  |  Yang, D. 
Financial Decision: Total Savings Accumulated 
Year: 2011
Country: Malawi 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Commitment Devices 
Intervention Area: Commitment Features 

Savings defaults and payment delays for cash transfers: Field experimental evidence from Malawi

Financial products and transfer schemes are typically designed to improve welfare by helping individuals follow through on their intertemporal plans. We implement an artefactual field experiment in Malawi to test the ability of households to manage a cash windfall by varying whether 474 households receive a payment in cash or through direct deposit into pre-established accounts at a local bank. Payments are made immediately, with one day delay, or with eight days delay. Defaulting the payments into savings accounts leads to higher net deposits into bank accounts, an effect that persists for a number of weeks afterwards. However, neither savings defaults nor payment delays affect the amount or composition of spending, suggesting that households manage cash effectively without the use of formal financial products. 

Author: Brune, L.  |  Giné, X.  |  Goldberg, J.  |  Yang, D. 
Financial Decision: Total Savings Accumulated 
Year: 2016
Country: Malawi 
Product Type: Bank Account 
Product Category: Savings 
Intervention: Defaults 
Intervention Area: Default Choice Options 

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