IDEAS home Printed from https://ideas.repec.org/p/idb/brikps/13379.html
   My bibliography  Save this paper

The Promises of Digital Bank Accounts for Low-income Individuals

Author

Listed:
  • Hernández Romero, Karla
  • Vera-Cossio, Diego A.
  • Hoffmann, Bridget
  • Pecha, Camilo

Abstract

The push for adopting digital modes of payment rests on three promises: increased efficiency of transactions, increased financial inclusion, and improvements in the financial well-being of low-income individuals. We experimentally test the extent to which these promises are fulfilled. We exploit the random assignment into an intervention to encourage direct deposits of recurrent government benefits into digital bank accounts in Colombia. Switching from cash to direct deposits reduces disbursement errors and increases access to benefits among eligible beneficiaries. It also increases the ownership of bank accounts, the demand for formal loans, and loan take-up among individuals without a financial history. However, we do not find evidence of improvements in financial well-being across any of our metrics.

Suggested Citation

  • Hernández Romero, Karla & Vera-Cossio, Diego A. & Hoffmann, Bridget & Pecha, Camilo, 2024. "The Promises of Digital Bank Accounts for Low-income Individuals," IDB Publications (Working Papers) 13379, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:13379
    DOI: http://dx.doi.org/10.18235/0005521
    as

    Download full text from publisher

    File URL: https://publications.iadb.org/publications/english/document/The-Promises-of-Digital-Bank-Accounts-for-Low-income-Individuals.pdf
    Download Restriction: no
    File URL: https://libkey.io/http://dx.doi.org/10.18235/0005521?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Pascaline Dupas & Dean Karlan & Jonathan Robinson & Diego Ubfal, 2018. "Banking the Unbanked? Evidence from Three Countries," American Economic Journal: Applied Economics, American Economic Association, vol. 10(2), pages 257-297, April.
    2. Anderson, Michael L, 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt15n8j26f, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Valentina Brailovskaya & Pascaline Dupas & Jonathan Robinson, 2024. "Is Digital Credit Filling a Hole or Digging a Hole? Evidence from Malawi," The Economic Journal, Royal Economic Society, vol. 134(658), pages 457-484.
    4. Kanz, Martin & Breza, Emily & Klapper, Leora F., 2020. "Learning to Navigate a New Financial Technology: Evidence from Payroll Accounts," CEPR Discussion Papers 15565, C.E.P.R. Discussion Papers.
    5. Joshua E. Blumenstock & Michael Callen & Anastasiia Faikina & Stefano Fiorin & Tarek Ghani & Michael J. Callen, 2023. "Strengthening Fragile States: Evidence from Mobile Salary Payments in Afghanistan," CESifo Working Paper Series 10510, CESifo.
    6. Joshua Blumenstock & Michael Callen & Tarek Ghani, 2018. "Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan," American Economic Review, American Economic Association, vol. 108(10), pages 2868-2901, October.
    7. Abhijit Banerjee & Claudia Martinez A. & Esteban Puentes, 2023. "The Impact of Subsidy Delivery Method on Savings Behavior: Experimental Evidence," Working Papers wp548, University of Chile, Department of Economics.
    8. Pierre Bachas & Paul Gertler & Sean Higgins & Enrique Seira, 2021. "How Debit Cards Enable the Poor to Save More," Journal of Finance, American Finance Association, vol. 76(4), pages 1913-1957, August.
    9. Suresh de Mel & Craig McIntosh & Ketki Sheth & Christopher Woodruff, 2022. "Can Mobile-Linked Bank Accounts Bolster Savings? Evidence from a Randomized Controlled Trial in Sri Lanka," The Review of Economics and Statistics, MIT Press, vol. 104(2), pages 306-320, May.
    10. Emily Breza & Martin Kanz & Leora F. Klapper, 2020. "Learning to Navigate a New Financial Technology: Evidence from Payroll Accounts," NBER Working Papers 28249, National Bureau of Economic Research, Inc.
    11. Anderson, Michael L., 2008. "Multiple Inference and Gender Differences in the Effects of Early Intervention: A Reevaluation of the Abecedarian, Perry Preschool, and Early Training Projects," Journal of the American Statistical Association, American Statistical Association, vol. 103(484), pages 1481-1495.
    12. Jenny C. Aker & Rachid Boumnijel & Amanda McClelland & Niall Tierney, 2016. "Payment Mechanisms and Antipoverty Programs: Evidence from a Mobile Money Cash Transfer Experiment in Niger," Economic Development and Cultural Change, University of Chicago Press, vol. 65(1), pages 1-37.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Orkun Saka & Barry Eichengreen & Cevat Giray Aksoy, 2022. "Epidemic Exposure, Financial Technology, and the Digital Divide," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(7), pages 1913-1940, October.
    2. Orkun Saka & Barry Eichengreen & Cevat Giray Aksoy, 2021. "Epidemic Exposure, Fintech Adoption, and the Digital Divide," NBER Working Papers 29006, National Bureau of Economic Research, Inc.
    3. Orkun Saka & Barry Eichengreen & Cevat Giray Aksoy, 2022. "Epidemic Exposure, Financial Technology, and the Digital Divide," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(7), pages 1913-1940, October.
    4. repec:zbw:bofitp:2021_013 is not listed on IDEAS
    5. Vera-Cossio, Diego A. & Hoffmann, Bridget & Pecha, Camilo & Gallego, Jorge & Stampini, Marco & Vargas, David & Medina, María Paula & Álvarez, Esteban, 2023. "Re-thinking Social Protection: From Poverty Alleviation to Building Resilience in Middle-Income Households," IDB Publications (Working Papers) 12925, Inter-American Development Bank.
    6. Kanz, Martin & Breza, Emily & Klapper, Leora F., 2020. "Learning to Navigate a New Financial Technology: Evidence from Payroll Accounts," CEPR Discussion Papers 15565, C.E.P.R. Discussion Papers.
    7. Catia Batista & Pedro C. Vicente, 2018. "Is mobile money changing rural Africa? Evidence from a field experiment," NOVAFRICA Working Paper Series wp1805, Universidade Nova de Lisboa, Nova School of Business and Economics, NOVAFRICA.
    8. Emma Riley, 2022. "Resisting Social Pressure in the Household Using Mobile Money: Experimental Evidence on Microenterprise Investment in Uganda," CSAE Working Paper Series 2022-04, Centre for the Study of African Economies, University of Oxford.
    9. Giné, Xavier & Goldberg, Jessica, 2023. "Experience in financial decision-making: Field evidence from Malawi," Journal of Development Economics, Elsevier, vol. 161(C).
    10. Seth Garz & Xavier Gine & Dean Karlan & Rafe Mazer & Caitlin Sanford & Jonathan Zinman, 2021. "Consumer Protection for Financial Inclusion in Low- and Middle-Income Countries: Bridging Regulator and Academic Perspectives," Annual Review of Financial Economics, Annual Reviews, vol. 13(1), pages 219-246, November.
    11. Bando, Rosangela & Galiani, Sebastian & Gertler, Paul, 2022. "Another brick on the wall: On the effects of non-contributory pensions on material and subjective well being," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 16-26.
    12. Steinert, Janina I. & Zenker, Juliane & Filipiak, Ute & Movsisyan, Ani & Cluver, Lucie D. & Shenderovich, Yulia, 2018. "Do saving promotion interventions increase household savings, consumption, and investments in Sub-Saharan Africa? A systematic review and meta-analysis," World Development, Elsevier, vol. 104(C), pages 238-256.
    13. Chen, S. & Doerr, S. & Frost, J. & Gambacorta, L. & Shin, H.S., 2023. "The fintech gender gap," Journal of Financial Intermediation, Elsevier, vol. 54(C).
    14. Batista, Catia & Vicente, Pedro C., 2020. "Improving access to savings through mobile money: Experimental evidence from African smallholder farmers," World Development, Elsevier, vol. 129(C).
    15. Leora Klapper, 2023. "How digital payments can benefit entrepreneurs," IZA World of Labor, Institute of Labor Economics (IZA), pages 396-396, April.
    16. Erica Field & Rohini Pande & Natalia Rigol & Simone Schaner & Charity Troyer Moore, 2021. "On Her Own Account: How Strengthening Women's Financial Control Impacts Labor Supply and Gender Norms," American Economic Review, American Economic Association, vol. 111(7), pages 2342-2375, July.
    17. Pierre Bachas & Paul Gertler & Sean Higgins & Enrique Seira, 2021. "How Debit Cards Enable the Poor to Save More," Journal of Finance, American Finance Association, vol. 76(4), pages 1913-1957, August.
    18. Jones, Kelly & Gong, Erick, 2021. "Precautionary savings and shock-coping behaviors: Effects of promoting mobile bank savings on transactional sex in Kenya," Journal of Health Economics, Elsevier, vol. 78(C).
    19. Rosangela Bando & Sebastian Galiani & Paul Gertler, 2020. "The Effects of Noncontributory Pensions on Material and Subjective Well-Being," Economic Development and Cultural Change, University of Chicago Press, vol. 68(4), pages 1233-1255.
    20. Apeti, Ablam Estel, 2023. "Household welfare in the digital age: Assessing the effect of mobile money on household consumption volatility in developing countries," World Development, Elsevier, vol. 161(C).
    21. Craig McIntosh & Andrew Zeitlin, 2021. "Cash versus Kind: Benchmarking a Child Nutrition Program against Unconditional Cash Transfers in Rwanda," Papers 2106.00213, arXiv.org.

    More about this item

    Keywords

    Technology adoption; Social protection; Formal financial products;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:idb:brikps:13379. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Felipe Herrera Library (email available below). General contact details of provider: https://edirc.repec.org/data/iadbbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.