Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence from Savings Accounts
While popular with policymakers, most evidence on consumer financial disclosure’s effectiveness studies borrowing decisions (where optimality is unclear) or lab experiments (where attention is not scarce). We provide field evidence from randomized-controlled trials with 124,000 savings-account holders at five UK depositories. Treated consumers were disclosed varying degrees of salient information about alternative products, including one with their current provider strictly dominating their current product. Despite switching taking roughly 15 minutes and the moderate average potential gains ($190/year), switching is rare across disclosure designs and depositors. We find pessimistic beliefs drive disclosure inattention and limit disclosure’s effectiveness, helping explain deposit stickiness.
For helpful comments, we thank our discussants Xiao Liu, Daniel Martin, and Adair Morse; participants at Advances with Field Experiments 2018 Conference, Boulder Summer Conference on Consumer Financial Decision Making, Central Bank of Ireland, CFPB Research Conference, Chicago Booth, MIT, NBER Summer Institute (Law & Economics; Risks of Financial Institutions), RAND Behavioral Finance Forum, and SITE; and Paul Asquith, Joseph Briggs, Peter Ganong, Michael Grubb, Arvind Krishnamurthy, Sheisha Kulkarni, David Laibson, Christian Leuz, Peter Lukacs, Brigitte Madrian, Philipp Schnabl, Rodrigo Verdi, and Jonathan Zinman. Matthew Ward and Tim Burrell provided invaluable help with execution. We thank Margarita Alvarez-Echandi, Sam Hughes, Tammy Lee, and Lei Ma for their research assistance. This research was conducted in conjunction with the Financial Conduct Authority, where Adams, Hunt, and Zaliauskas were employed during the trials. The views expressed in this paper are those of the authors and not the Financial Conduct Authority, which has reviewed the paper for human subjects compliance and the release of confidential information. All errors and omissions are the authors’ own. This RCT was registered in the American Economic Association Registry for randomized control trials under trial number AEARCTR-0004053. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Redis Zaliauskas was employed by the Financial Conduct Authority during the completion of this research. He is now employed by Lloyds Banking Group, a UK financial institution subject to disclosure regulation. Lloyds Banking Group did not provide any input into this research.
Paul Adams & Stefan Hunt & Christopher Palmer & Redis Zaliauskas, 2021. "Testing the effectiveness of consumer financial disclosure: Experimental evidence from savings accounts," Journal of Financial Economics, vol 141(1), pages 122-147.