Unbanked Consumers Research Articles

How informal financial service institutes facilitate the financial inclusion of low-income, unbanked consumers

PurposeThe present study aimed to provide an understanding of the roles of community-based financial service organizations (i.e. rotating savings and credit associations [ROSCAs] as institutional pillars in facilitating low-income, unbanked consumers’ access to informal financial services).Design/methodology/approachSemi-structured interviews were conducted with 39 low-income, unbanked consumers participating in ROSCAs in Pakistan, where only 21% of adults have a bank account and almost four out of five individuals live on a low income. The obtained data were analyzed using the thematic analysis technique.FindingsROSCAs’ regulatory, sociocultural and cognitive aspects facilitate low-income, unbanked consumers’ utilization of informal financial services owing to their approachability by, suitability for, and fairness to such consumers. Thus, they promote such consumers’ financial inclusion.Practical implicationsLow-income consumers are mostly unable to access formal financial services due to the existing supply- and demand-side impediments. Understanding ROSCAs’ institutional functioning can help formal financial service providers create more transformative financial services based on the positive institutional aspects of ROSCAs to enhance poor consumers’ financial inclusion and well-being.Social implicationsThe inclusion of low-income, unbanked consumers in formal banking services will help them better control their finances.Originality/valueMany low-income, unbanked consumers in developing countries utilize informal financial services to meet their basic financial needs, but service researchers have rarely investigated how informal financial institutions function. The present study showed that ROSCAs, as informal institutions, meet low-income, unbanked consumers’ personal, social and financial needs in a befitting manner, which encourages such consumers to use the financial services offered by ROSCAs.

An Economic Case against Public Banking, and a Case for It

Abstract In this article, we examine the economics of public consumer banking in the United States. Public expenditures on consumer banking can take the form of price subsidies or direct provision. The economic case for price subsidies is weak because the evidence suggests most unbanked consumers would prefer a cash grant. The economic case for public provision is also weak because the existing market failures in banking are better remedied by regulation. The exceptions to this rule are check cashing and related payment services, which could be supplied by the US Postal Service (USPS) at a lower cost than private providers. On the other hand, economic arguments for the superiority of cash transfers presume that the institutional infrastructure exists to deliver them. But an effective infrastructure for public transfers does not exist in the United States and is only possible with universal ownership of payment accounts, which in turn requires some form of public subsidy or provision. We suggest one path forward: expand the financial services currently offered to federal beneficiaries—such as Social Security recipients—by the Treasury.

Unbanked consumers and how they pay

Unbanked consumers and how they pay

What are the consequences faced by unbanked consumers while coping with their credit exclusion

This study explored the consequences of the strategies employed by low-income consumers to cope with their credit exclusion and how they feel when they experience such consequences. Data were collected through semi-structured interviews of 50 unbanked low-income consumers. The findings suggest that low-income consumers coping with their credit exclusion by obtaining loans from various informal sources sometimes enabled them to meet their various needs, which aroused feelings of achievement and belongingness in them. However, they were often unsuccessful in coping with their credit exclusion by utilising informal sources of finance, which aroused feelings of powerlessness in them. This study offers a number of avenues for future research in the realm of financial services.

Income and banking access in the USA: The effect on bill payment choice

Consumer payment methods are determined by a number of factors, including the type of bill, the value of the bill, whether the bill is to be paid online or automatically, and — by no means least of all — the demographic and income profile of the individual making the payment. As this paper argues, the convenience and speed provided by automatic and online payments do not benefit all US consumers equally. Unbanked consumers lack access to most payment methods and hence use cash or prepaid cards to pay their bills. Low-income consumers are more likely to pay in person, use significantly more cash, and are less likely to set up automated or online bill payments, regardless of whether they have a bank account.

Cashless stores and cash users

The emergence of cashless stores has led several cities and states to ban such stores. This article investigates this policy issue by characterizing consumers who pay cash for in-person purchases and banked and unbanked consumers who do not have credit or debit cards. Using a random utility model, I simulate the effects on consumer welfare caused by a hypothetical complete transition to cashless stores. The simulations show that the burden from this transition on consumers with no credit or debit cards is seven times higher than the burden on consumers who have both cards. The conclusion lists policy options for alternatives to cash that may be needed before all brick-and-mortar stores become cashless.

What consequences are faced by unbanked consumers while coping with their credit exclusion

What consequences are faced by unbanked consumers while coping with their credit exclusion

PENGARUH KUALITAS WEBSITE (WEBQUAL 4.0) DAN KUALITAS PELAYANAN (SERVQUAL) ONLINE TO OFFLINE (O2O) COMMERCE TERHADAP KEPUASAN PELANGGAN DAN MINAT PEMBELIAN ULANG

Perkembangan industri e-commerce di Indonesia belakangan ini melaju dengan pesat. Tetapi di balik semua itu, ada masalah yang terus membayangi yaitu permasalahan logistik dan infrastruktur Indonesia dalam memenuhi permintaan pasar, banyaknya konsumen yang unbanked, serta kecenderungan konsumen untuk melihat dulu barangnya sebelum berbelanja. Hal ini menjadi faktor keengganan konsumen untuk melakukan pembelian ulang di e-commerce. Oleh sebab itu, konsep O2O commerce yang menggabungkan antara saluran transaksi online dan offline diyakini dapat menjawab tantangan yang sedang dihadapi oleh e-commerce saat ini. Minat pembelian ulang pelanggan dan kepuasan pelanggan O2O commerce diyakini dipengaruhi oleh faktor kualitas website dan kualitas pelayanan oflline. Penelitian ini dilakukan dengan tujuan untuk mengetahui pengaruh kualitas website (WebQual 4.0) dan kualitas pelayanan (ServQual) O2O commerce terhadap kepuasan pelanggan dan minat pembelian ulang. Teknik analisis yang digunakan dalam penelitian ini adalah SEM-PLS (Structural Equation Modeling – Partial Least Square) dengan sampel sebanyak 100 responden. Hasil penelitian menunjukkan bahwa kualitas website dan kualitas pelayanan O2O commerce berpengaruh positif signifikan terhadap kepuasan pelanggan dan minat pembelian ulang konsumen.

Cashless Stores and Cash Users

The emergence of cashless stores has led several cities and states to ban such stores. This article investigates this policy issue by characterizing consumers who pay cash for in-person purchases and banked and unbanked consumers who do not have credit or debit cards. Using a random utility model, I simulate the effects on consumer welfare caused by a hypothetical complete transition to cashless stores. The simulations show that the burden from this transition on consumers with no credit or debit cards is seven times higher than the burden on consumers who have both cards. The conclusion lists policy options for alternatives to cash that may be needed before all brick-and-mortar stores become cashless.

Banks’ unfairness and the vulnerability of low-income unbanked consumers

ABSTRACTThis paper’s objective was to explore low-income unbanked consumers’ perceptions of bank fairness and the way these perceptions were linked to consumer experiences of vulnerability. Qualitative data were used to analyse low-income consumers’ perceptions about banks’ services and communications. The study finds that although consumers’ financial inclusion is partially hindered by their personal circumstances, the perceived unfair treatment by banks has an even more negative impact on their financial inclusion. Low-income unbanked individuals report banks avoiding them, discriminating against them and impeding their financial inclusion. Banks’ perceived unfairness towards low-income consumers leads those consumers to experience vulnerability in numerous ways. Finally, we provide public policy implications for low-income consumers’ well-being and financial inclusion and to assist them in mitigating their vulnerability.

Banking on Distributed Ledger Technology: Can It Help Banks Address Financial Inclusion?

Despite its promise, distributed ledger technology is unlikely to draw unbanked consumers into the financial mainstream

Zoona mobile money: investing for impact (cases A and B)

Subject area Impact investing, Social enterprise. Study level/applicability MBA, EMBA, Executive Education. Case overview Zoona mobile money: investing for impact details a slightly altered version of the real events that occurred in late 2011 with the series A round of investment in Zoona, a mobile money business in Zambia. The focus is on the decisions that have to be made by the management team of a socially innovative tech start-up (Zoona) providing mobile money and financial services to previously unbanked consumers in Zambia. Expected learning outcomes By the end of this case, the student should be able to: understand the basics of term sheets and be able to perform a high level analysis and comparison of two distinct term sheets; identify investor objectives, ultimately recognising the general differences between private equity and venture capital investors; identify and weigh the costs and benefits of term sheets, as well as identify negotiating points and necessary trade-offs in the investment process; and identify and understand the “soft” benefits of investors and weigh these in relation to a term sheet analysis. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes. Subject code CSS 1: Accounting and Finance.

How the unbanked cope with financial exclusion: Evidence from Pakistan

This article investigates both the coping strategies employed by low-income unbanked consumers in Pakistan and the consequences of those strategies. Qualitative data were gathered from low-income unbanked consumers through in-depth interviews. The findings suggest that unbanked consumers utilize their respective social networks and various market and personal resources to cope with financial exclusion. The utilization of social network resources to cope with financial exclusion typically enabled participants to fulfill their obligations in a positive manner and enhanced solidarity and trust among group members, whereas the use of market and personal resources tended to produce more negative consequences in the form of different types of risk. The article provides managerial implications for developing services that enhance the well-being of unbanked consumers.

Traditional retail at the crossroads of inclusive payment services: How serving the needs of the traditional retail sector can accelerate financial inclusion—examples from Indonesia

Traditional retailers should be incorporated in efforts to expand payment and financial services to under-banked markets. Traditional retailers and their suppliers constitute a significant portion of developing countries’ payment flows and yet have limited access to financial and payment services. They also sit at the crossroads of the cash economy, conducting a large volume of repeat transactions with suppliers as well as unbanked consumers. While incentives for end consumers to pay retailers electronically instead of in cash remain weak, suppliers to these retailers are better equipped and under more pressure to transition to electronic payments. Suppliers’ incentives can be harnessed to expand adoption of digital payments. Electronic payments can bring greater value to retailers and their suppliers if they are integrated with solutions that unlock gains in operations, sales and inventory finance. Because suppliers are generally already banked, only one party to the transaction, the retailer, needs to be persuaded to transition away from cash. If retailers pay suppliers electronically, their own incentive to accept electronic value, instead of cash, from consumers increases. This can help to reach the tipping point at which the switch from cash to electronic begins to be pushed not just for remote but also face-to-face transactions. Non-bank payments and supply chain services for this segment of the economy can help to unlock these economies of scale. Operational and business links between new payment networks and banking services can be mutually beneficial. Mobile and e-money providers have advantages in reaching small retailers, some of which act as agents. Meanwhile banks and supply chain integrators reach suppliers and distributors serving these retailers. Policy makers should encourage these actors to align to serve the needs of the retail industry in a manner that will boost overall payment service uptake and usage.

The Dodd-Frank Act Five Years Later: Are We Freer?

This congressional testimony summarizes the effects on consumers and the economy of Dodd-Frank, the Durbin Amendment the Consumer Financial Protection Bureau, and other government regulations (such as the CARD Act of 2009) enacted in the wake of the recent financial crisis. The testimony notes that the combined effect of these laws and regulations has resulted in higher bank fees, a dramatic reduction in access to free checking, an increase in the number of unbanked consumers, a dramatic reduction in access to credit cards for low-income consumers, and continued low access to mortgages, especially among lower-income and higher-risk borrowers. In addition, because of the crushing and disproportionate burden of Dodd-Frank’s regulations on smaller banks, the law has promoted consolidation of the banking industry and forced many smaller banks to exit certain product markets, especially mortgages. This combined effect has reduced choice and competition for consumers. Finally, the lack of democratic accountability over the CFPB has resulted in an agency defined by bureaucratic overreach, resulting in an invasive and reckless data-mining project and assertion over many industries and products that stand outside of the agency’s authorized jurisdiction.

Driver of Choice? The Cost of Financial Products for Unbanked Consumers

This paper examines whether some of the unbanked consumers’ choice of general purpose reloadable (GPR) prepaid cards over checking accounts and alternative financial service (AFS) products can be explained by the cost incurred by those consumers. We compare the three types of products by constructing consumer models based on the actual behavior of GPR prepaid cardholders and applying those models to the fee schedules of actual products offered in the market. Overdrafts are a major factor affecting the cost rankings. For consumers who regularly or occasionally overdraw their accounts, checking accounts are more costly than GPR cards or AFS products. In contrast, for consumers who do not need overdraft capability and short-term credit, GPR cards are more costly than checking accounts. The cost difference across the products clearly explains the former type of consumers’ choice of financial products, while it does not explain the latter type of consumers’ choice.

English

This paper examines whether some of the unbanked consumers’ choice of general purpose reloadable (GPR) prepaid cards over checking accounts and alternative financial service (AFS) products can be explained by the cost incurred by those consumers. We compare the three types of products by constructing consumer models based on the actual behavior of GPR prepaid cardholders and applying those models to the fee schedules of actual products offered in the market. Overdrafts are a major factor affecting the cost rankings. For consumers who regularly or occasionally overdraw their accounts, checking accounts are more costly than GPR cards or AFS products. In contrast, for consumers who do not need overdraft capability and short-term credit, GPR cards are more costly than checking accounts. The cost difference across the products clearly explains the former type of consumers’ choice of financial products, while it does not explain the latter type of consumers’ choice. JEL Classification: D12; E42; G21

The Dodd-Frank Act Five Years Later: Are We More Stable?

This congressional testimony summarizes the effects on consumers and the economy of Dodd-Frank, the Durbin Amendment the Consumer Financial Protection Bureau, and other government regulations (such as the CARD Act of 2009) enacted in the wake of the recent financial crisis. The testimony notes that the combined effect of these laws and regulations has resulted in higher bank fees, a dramatic reduction in access to free checking, an increase in the number of unbanked consumers, a dramatic reduction in access to credit cards for low-income consumers, and continued low access to mortgages, especially among lower-income and higher-risk borrowers. In addition, because of the crushing and disproportionate burden of Dodd-Frank’s regulations on smaller banks, the law has promoted consolidation of the banking industry and forced many smaller banks to exit certain product markets, especially mortgages. This combined effect has reduced choice and competition for consumers. Finally, the lack of democratic accountability over the CFPB has resulted in an agency defined by bureaucratic overreach, resulting in an invasive and reckless data-mining project and assertion over many industries and products that stand outside of the agency’s authorized jurisdiction.

How Consumers Pay: Adoption and Use of Payments

Using data from a nationally representative survey on consumer payment behavior, we estimate Heckman two-stage regressions on the adoption and use of seven different payment instruments. We find that the characteristics of payments are important in determining consumer payment behavior, even when controlling for demographic and financial attributes: setup and record keeping are especially important in explaining adoption, while security is important in explaining which methods consumers use for transactions. For the first time, we estimate the number of payment methods adopted by consumers conditional on having access to a bank account, as the unbanked consumers’ payment choices are much more limited than those of consumers with bank accounts. This paper follows the analysis in Schuh and Stavins (2010), but with improved data, allowing us to estimate a better model of payment behavior. As in the previous study, cost is found to significantly affect payment use, indicating that the recent increase in the cost of debit cards issued by some banks may lead to a reduction in U.S. consumers’ reliance on debit cards for transactions.

How Consumers Pay: Adoption and Use of Payments

Using data from a nationally representative survey of U.S. consumers, we estimate Heckman two-stage regressions on the adoption and use of seven different payment instruments. We find that the characteristics of payment instruments are important in determining consumer payment behavior, even when controlling for demographic and financial attributes: difficulty to setup and keep records are especially important in explaining adoption of payments, while ease of use, cost and security are important in explaining which methods consumers use for transactions. For the first time, the number of payment methods adopted by consumers conditional on having access to a bank account is estimated, as the unbanked consumers’ payment choices are much more limited than those of consumers with bank accounts. Because cost is found to significantly affect payment use, a potential increase in the cost of credit or debit cards following recent regulatory changes affecting those payment methods may lead to a reduction in U.S. consumers’ reliance on payment cards for transactions.