[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/1073.html
   My bibliography  Save this paper

Sending out an SMS: Automatic Enrollment Experiments for Overdraft Alerts

Author

Listed:
  • Michael Grubb

    (Boston College)

  • Darragh Kelly

    (Google)

  • Jeroen Niebohr

    (London School of Economics)

  • Matthew Osborne

    (University of Toronto)

  • Jonathan Shaw

    (UK Financial Conduct Authority)

Abstract
At-scale field experiments at major UK banks show that automatic enrollment into “just-in-time” text message alerts reduces unarranged overdraft and unpaid item charges 17–19% and arranged overdraft charges 4–8%, implying annual market-wide savings of £170–240 million. Incremental benefits from additional “early warning” alerts, triggered by low account balances are not statistically significant, although economically significant effects are not ruled out. Prior to the experiments, over half of overdrafting could have been avoided by using lower-cost liquidity available in savings and credit card accounts (FCA, 2018c). Alerts help consumers achieve less than half of these potential savings.

Suggested Citation

  • Michael Grubb & Darragh Kelly & Jeroen Niebohr & Matthew Osborne & Jonathan Shaw, 2024. "Sending out an SMS: Automatic Enrollment Experiments for Overdraft Alerts," Boston College Working Papers in Economics 1073, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:1073
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/EC-P/wp1073.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marianne Bertrand & Dean Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2010. "What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 263-306.
    2. Bertrand, Marianne & Karlan, Dean S. & Mullainathan, Sendhil & Shafir, Eldar & Zinman, Jonathan, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Center Discussion Papers 28441, Yale University, Economic Growth Center.
    3. Victor Stango & Jonathan Zinman, 2014. "Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Bank Overdraft Fees," The Review of Financial Studies, Society for Financial Studies, vol. 27(4), pages 990-1030.
    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. Saugato Datta & Sendhil Mullainathan, 2014. "Behavioral Design: A New Approach to Development Policy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 7-35, March.
    2. Alberto Chong & Dean Karlan & Jeremy Shapiro & Jonathan Zinman, 2015. "(Ineffective) Messages to Encourage Recycling: Evidence from a Randomized Evaluation in Peru," The World Bank Economic Review, World Bank, vol. 29(1), pages 180-206.
    3. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2014. "Savings by and for the Poor: A Research Review and Agenda," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 36-78, March.
    4. Kast, Felipe & Meier, Stephan & Pomeranz, Dina, 2018. "Saving more in groups: Field experimental evidence from Chile," Journal of Development Economics, Elsevier, vol. 133(C), pages 275-294.
    5. repec:bla:annpce:v:89:y:2018:i:1:p:175-199 is not listed on IDEAS
    6. Damgaard, Mette Trier & Nielsen, Helena Skyt, 2018. "Nudging in education," Economics of Education Review, Elsevier, vol. 64(C), pages 313-342.
    7. B Kelsey Jack, "undated". "Market Inefficiencies and the Adoption of Agricultural Technologies in Developing Countries," CID Working Papers 50, Center for International Development at Harvard University.
    8. Dean Karlan & John A. List, 2007. "Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment," American Economic Review, American Economic Association, vol. 97(5), pages 1774-1793, December.
    9. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    10. Christa N. Gibbs & Benedict Guttman-Kenney & Donghoon Lee & Scott Nelson & Wilbert Van der Klaauw & Jialan Wang, 2024. "Consumer Credit Reporting Data," Staff Reports 1114, Federal Reserve Bank of New York.
    11. Shawn Cole & Xavier Gine & Jeremy Tobacman & Petia Topalova & Robert Townsend & James Vickery, 2013. "Barriers to Household Risk Management: Evidence from India," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 104-135, January.
    12. Dean Karlan & Adam Osman & Nour Shammout, 2021. "Increasing Financial Inclusion in the Muslim World: Evidence from an Islamic Finance Marketing Experiment," The World Bank Economic Review, World Bank, vol. 35(2), pages 376-397.
    13. 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.
    14. Vincenzo Galasso & Tommaso Nannicini, 2016. "Persuasion and Gender: Experimental Evidence from Two Political Campaigns," CESifo Working Paper Series 5868, CESifo.
    15. Omar Al-Ubaydli & John List, 2016. "Field Experiments in Markets," Artefactual Field Experiments j0002, The Field Experiments Website.
    16. Sule, Alan & Cemalcilar, Mehmet & Karlan, Dean S. & Zinman, Jonathan, 2015. "Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey," Center Discussion Papers 198558, Yale University, Economic Growth Center.
    17. Zohal Hessami, 2016. "How Do Voters React to Complex Choices in a Direct Democracy? Evidence from Switzerland," Kyklos, Wiley Blackwell, vol. 69(2), pages 263-293, May.
    18. Chuan, Amanda & Samek, Anya Savikhin, 2014. "“Feel the Warmth” glow: A field experiment on manipulating the act of giving," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 198-211.
    19. Robin Burgess & Michael Greenstone & Nicholas Ryan & Anant Sudarshan, 2020. "Demand for Electricity on the Global Electrification Frontier," Cowles Foundation Discussion Papers 2222, Cowles Foundation for Research in Economics, Yale University.
    20. Johan Almenberg & Artashes Karapetyan, 2009. "Mental accounting in the housing market," IEW - Working Papers 453, Institute for Empirical Research in Economics - University of Zurich.
    21. María Paz Espinosa & Javier Gardeazabal, 2013. "Do Students Behave Rationally in Multiple Choice Tests? Evidence from a Field Experiment," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 9(2), pages 107-135, July.

    More about this item

    Keywords

    overdraft fees; early warning alerts; liquidity;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

    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:boc:bocoec:1073. 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: Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/debocus.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.