Provisional Data. Do not cite or qu ote for any purpose. Payments Innovations in Serving Low- and Moderate- Income Households: Evidence from a New Survey Access to Finance: Building Inclusive Financial Systems World Bank, Washington DC May 30, 2006 Michael S. Barr University of Michigan & Brookings Institution (Joint Work with Ed Bachelder & Jane Dokko)
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Payments Innovations in Serving Low- and Moderate-Income Households: Evidence from a New Survey
Payments Innovations in Serving Low- and Moderate-Income Households: Evidence from a New Survey. Access to Finance: Building Inclusive Financial Systems World Bank, Washington DC May 30, 2006 Michael S. Barr University of Michigan & Brookings Institution - PowerPoint PPT Presentation
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Provisional Data. Do not cite or quote for any purpose.
Payments Innovations in Serving Low- and Moderate-
Income Households: Evidence from a New Survey
Access to Finance: Building Inclusive Financial Systems
World Bank, Washington DCMay 30, 2006
Michael S. BarrUniversity of Michigan & Brookings Institution(Joint Work with Ed Bachelder & Jane Dokko)
Provisional Data. Do not cite or quote for any purpose.
Banking and Payment Cards What types of bank account features and
payment cards do different types of low- and moderate-income households find attractive? Detroit Area Study & Conjoint Analysis
Main Findings Many unbanked HH would like a bank account
& payment cards LMI HH’s value low monthly cost & federal
protection Policy Implications
Provisional Data. Do not cite or quote for any purpose.
Detroit Area Household Financial Services Survey: Overview Survey of 1,003 households in Detroit metro area
(Wayne, Oakland, and Macomb counties) Random, stratified sample. HH area median =
49,000 (census definitions) 0-60% of area median (up to $29,000) 61-80% of area median ($29,000-$39,000) 81-120% of area median ($39,000-59,000)
Oversample low-income census tracts Ask randomly selected individual from household
about own & household’s financial service use In-person, computer assisted. Average interview
length 76 minutes. Production hrs/interview: 8.8 65% response rate
Provisional Data. Do not cite or quote for any purpose.
Demographics of Sample Unweighted. Provisional Data. Sample is more socio-economically
disadvantaged than average US household Mostly black, 2/3 female, mostly unmarried $18,000 median household income 34% live below the federal poverty line 1/3 have less than a HS Diploma or GED 50% currently employed 27% do not have a bank account
Provisional Data. Do not cite or quote for any purpose.
Unbanked Younger, less educated, less employed,
poorer than banked individuals 71% previously banked
69% closed it b/c moved, high fees, NSF 31% bank closed b/c overdrafts
76% want to open a bank account 69% have looked into opening an account 19% report that a bank has denied an
application to open a bank account
Provisional Data. Do not cite or quote for any purpose.
Unbanked & Account Features 30% lower fees 20% convenient hours/locations 14% less confusing fees 13% lower minimum balances 11% get funds faster
Provisional Data. Do not cite or quote for any purpose.
C = Card Type P = Protection S = Savings Plan B = Bill Payment Capabilities A = Cash Access C = Cash Access Fees M = Monthly Fees
Logistic Response Curve
Provisional Data. Do not cite or quote for any purpose.
Preference by Age Take-rates for all feature bundles decrease
with age, while increasing with Federal Protection & product features.
0
10
20
30
40
50
60
70
Take-r
ate
Perc
enta
ge
Low Loww/Federal
Protect
Best w/oFederal
Protection
Best w/Federal
Protection
Age 61 & up
Age 25-60
Age 18-24
Age 61 & upAge 25-60Age 18-24
Provisional Data. Do not cite or quote for any purpose.
Preference by Income of Census Tract Take-rates for all feature bundles decrease
with income of census tract.
0
10
20
30
40
50
60
Take-r
ate
P
erc
enta
ge
Low Loww/Federal
Protect
Best w/oFederal
Protection
Best w/Federal
Protection
81-120% area median
61-80% area median
0-60% area median
81-120% area median61-80% area median0-60% area median
Provisional Data. Do not cite or quote for any purpose.
Preference by Banked Status Unbanked prefer even the lowest value
cards, which Federal Protection makes twice as attractive.
0
10
20
30
40
50
60
Take-r
ate
Perc
enta
ge
Low Loww/Federal
Protect
Best w/oFederal
Protection
Best w/Federal
Protection
Banked
Unbanked
BankedUnbanked
Provisional Data. Do not cite or quote for any purpose.
Policy Implications? Using interactive market model to guide private
sector initiatives to serve the unbanked Prepaid debit Bank ATM Payroll cards
Refining government strategies Federal ETA, First Account, new initiatives State EBT programs
Improving & simplifying consumer protection across card-based products FDIC Deposit & Federal Reserve Regulation E revisions Legislation needed to unify payments protections
Provisional Data. Do not cite or quote for any purpose.
Funders & Advisory Board of the Detroit Area Household Financial Services Study Funders
Ford Foundation Fannie Mae Foundation MacArthur Foundation Mott Foundation Casey Foundation Community Foundation of Southeast Michigan National Poverty Center CLOSUP University of Michigan Provost, OVPR, Law School
Advisory Board
James Carr (Fannie Mae Foundation), John Caskey (Swarthmore), Phoebe Ellsworth (Michigan), Reynolds Farley (ISR), Jeane Hogarth (Federal Reserve Board), Rochelle Lento (Michigan), Sherrie Rhine (Federal Reserve Board), Bob Schoeni (ISR), & Michael Stegman (University of North Carolina, Chapel Hill).
For further information see http://www-personal.umich.edu/~msbarr/ and click on “Detroit Area Study”