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Financial Inclusion and Consumer Payment Choice

Author

Listed:
  • Greene, Claire

    (Federal Reserve Bank of Boston)

  • Cole, Allison

    (MIT Sloan School of Management)

Abstract
This report examines similarities and differences among three groups of consumers: those without a checking or savings account (unbanked), bank account adopters who have used alternative financial services (AFS) in the past 12 months (underbanked), and bank account adopters who did not use AFS in the past 12 months (fully banked). Consumers in the three groups have different demographic characteristics, income, and payment behaviors: •The payment behavior of the underbanked is similar to that of the fully banked. •Unbanked consumers make fewer payments per month than the fully banked and the underbanked. •Fewer than half of the unbanked know their credit scores, while about 85 percent of the underbanked and the fully banked know theirs. •Both unbanked and underbanked consumers are significantly more likely than fully banked consumers to own a general purpose reloadable (GPR) prepaid card. We find no evidence that consumers are prevented from opening a bank account; many cite personal preferences and cost as reasons for choosing to be unbanked. These preferences are likely related to income constraints.

Suggested Citation

  • Greene, Claire & Cole, Allison, 2017. "Financial Inclusion and Consumer Payment Choice," Journal of Financial Transformation, Capco Institute, vol. 46, pages 219-235.
    • Handle: RePEc:ris:jofitr:1605
    as

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    References listed on IDEAS

    as
    1. Scott Schuh & Joanna Stavins, 2016. "How Do Speed And Security Influence Consumers' Payment Behavior?," Contemporary Economic Policy, Western Economic Association International, vol. 34(4), pages 595-613, October.
    2. Claire Greene & Oz Shy, 2015. "How are U.S. consumers using general purpose reloadable prepaid cards?: are they being used as substitutes for checking accounts?," Research Data Report 15-3, Federal Reserve Bank of Boston.
    3. Sergei Koulayev & Marc Rysman & Scott Schuh & Joanna Stavins, 2016. "Explaining adoption and use of payment instruments by US consumers," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 293-325, May.
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    Cited by:

    1. Jeffrey Carpenter & Emiliano Huet-Vaughn & Peter Hans Matthews & Andrea Robbett & Dustin Beckett & Julian Jamison, 2021. "Choice Architecture to Improve Financial Decision Making," The Review of Economics and Statistics, MIT Press, vol. 103(1), pages 102-118, March.
    2. Shy, Oz, 2020. "Low-income consumers and payment choice," Research in Economics, Elsevier, vol. 74(4), pages 292-300.
    3. Oz Shy, 2021. "Digital Currency, Digital Payments, and the 'Last Mile' to the Unbanked," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2021(9), pages 1-9, August.
    4. Claire Greene & Oz Shy, 2022. "Payment Card Adoption and Payment Choice," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2022(10), July.
    5. Claire Greene & Oz Shy, 2023. "How US Consumers without Bank Accounts Make Payments," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2023(1), January.
    6. repec:fip:a00001:94158 is not listed on IDEAS
    7. Joanna Stavins, 2017. "How do consumers make their payment choices?," Research Data Report 17-1, Federal Reserve Bank of Boston.

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    More about this item

    Keywords

    financial inclusion; underbanked; unbanked; consumer payment choice;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection

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