Princeton Economics Department
Princeton, NJ 08542
NBER Working Papers and Publications
|March 2017||Banking on Trust: How Debit Cards Enable the Poor to Save More|
with Paul Gertler, Sean Higgins, Enrique Seira: w23252
Trust is an essential element of economic transactions, but trust in financial institutions is low, especially among the poor. Debit cards provide not only easier access to savings, but also a mechanism to monitor bank account balances and thereby build trust in a financial institution. We study a natural experiment in which debit cards are rolled out to beneficiaries of a Mexican conditional cash transfer program whose benefits are already directly deposited into a savings account. Using administrative data on over 340,000 bank accounts over four years, we find that prior to receiving a debit card, beneficiaries do not save in these accounts. Beneficiaries then begin to increase their savings after 9 to 12 months with the card. During this initial stagnant period, they use the card to che...