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Paper that presents a study of consumer learning in the context of payroll accounts, a simple financial technology that is currently being rolled out to millions of workers worldwide in response to demands for increased supply chain transparency and as a result of the Covid-19 pandemic. The researchers conducted a field experiment with a population of salaried factory workers in Bangladesh who, prior to the study, received their wages entirely in cash. In the experiment, workers were randomly assigned to either continue receiving wages in cash, or begin receiving wage payments into a bank or mobile money payroll account. In a set of comparison treatments, workers were given an account but continued receiving monthly wage payments in cash. The researchers measure treatment effects on learning and real outcomes using a panel of surveys as well as administrative data. The researchers also employ a machine learning approach (Chernozhukov et al. 2018) to understand which types of consumers are able to learn how to use the financial technology in a more effective manner through exposure to payroll accounts. The researchers, additionally, examine the market-level implications of consumer learning with a complementary audit study that examines how the prevalence of illicit extra charges changes as consumer sophistication in the market increases and information asymmetries between consumers and financial intermediaries are diminished.

Research Questions

• How do inexperienced consumers learn to use a new financial technology?

Key Takeaways

• Exposure to payroll accounts leads to increased account use and consumer learning. Those receiving accounts with automatic wage payments learn to use the account without assistance, begin to use a wider set of account features, and learn to avoid illicit fees, which are common in emerging markets for consumer finance.
• The treatments have real effects, leading to increased savings and improvements in the ability to cope with unanticipated economic shocks.
• Mobile money agents are less likely to overcharge inexperienced customers in areas with high payroll account penetration.

Citation

Breza, E., Kanz, M., Klapper, L. (2020). Harvard. Learning to Navigate a New Financial Technology: Evidence from Payroll Accounts. Chief Evaluation Office, U.S. Department of Labor.

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This study was part of CEO’s Labor Research and Evaluation Grants, and was produced outside of CEO’s standard research development process.