How Debit Cards Enable the Poor to Save More
We study an at-scale natural experiment in which debit cards are given to cash transfer recipients who already have a bank account. Using administrative account data and household surveys, we find that beneficiaries accumulate a savings stock equal to 2 percent of annual income after two years with the card. The increase in formal savings represents an increase in overall savings, financed by a reduction in current consumption. There are two mechanisms: first, debit cards reduce transaction costs of accessing money; second, they reduce monitoring costs, leading beneficiaries to check their account balances frequently and build trust in the bank.
We are grateful to officials in Mexico’s government bank Bansefi and the conditional cash transfer program Prospera (formerly Oportunidades) for sharing data and answering numerous questions. At Bansefi, we are indebted to Miguel Ángel Lara, Oscar Moreno, Ramón Sanchez, and especially Benjamín Chacón and Ana Lilia Urquieta. At Prospera, we are indebted to Martha Cuevas, Armando Gerónimo, Rodolfo Sánchez, Carla Vázquez, and especially Rogelio Grados, Raúl Pérez, and José Solis. For comments that greatly improved the paper, we thank David Atkin, Alan Barreca, Richard Blundell, Chris Carroll, Carlos Chiapa, Shawn Cole, Natalie Cox, Pascaline Dupas, John Edwards, Gerardo Escaroz, Fred Finan, Jess Goldberg, Emilio Gutierrez, Jens Hainmueller, Anders Jensen, Anne Karing, Dean Karlan, Supreet Kaur, Leora Klapper, David Laibson, Ethan Ligon, John Loeser, Nora Lustig, Jeremy Magruder, Justin McCrary, Atif Mian, Ted Miguel, Doug Nelson, Christine Parlour, Betty Sadoulet, Todd Schoellman, Ben Sperisen, Jonathan Zinman, and numerous seminar participants. We are also grateful to Ignacio Camacho, Ernesto Castillo, Oscar Cuellar, Bernardo García, Austin Farmer, Joel Ferguson, and Isaac Meza for research assistance. Gertler and Seira gratefully acknowledge funding from the Consortium on Financial Systems and Poverty and the Institute for Money, Technology & Financial Inclusion. Higgins gratefully acknowledges funding from the Fulbright–García Robles Public Policy Initiative and National Science Foundation (Grant Number 1530800). All authors declare that they have no relevant or material financial interests that relate to the research in this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
PIERRE BACHAS & PAUL GERTLER & SEAN HIGGINS & ENRIQUE SEIRA, 2021. "How Debit Cards Enable the Poor to Save More," The Journal of Finance, vol 76(4), pages 1913-1957.