Working Paper: CEPR ID: DP13378
Authors: Christopher Woodruff; Suresh de Mel; Ketki Sheth; Craig McIntosh
Abstract: In developing economies, mobile-linked services have the potential to significantly reduce transaction costs and provide a truly new conduit that could be used to facilitate the flow of savings into banks. We test this premise by introducing a product that permits Sri Lankan households to deposit mobile airtime balances into a formal bank using a new mobile money interface. Using high frequency panel survey data and randomizing access and prices at the individual level, we find that there are moderate percentage increases in savings deposits with the partner institution and formal banks more generally, but no change in overall savings deposits. When the transaction costs are completely removed, only 26 percent of those offered the service use it, and 7 percent use it frequently. Overall, our results imply that transaction costs may not be a significant barrier to increasing deposits, limiting the potential gains of mobile-linked savings products for financial inclusion.
Keywords: financial services; savings; mobile money
JEL Codes: O16; O31; D14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mobile deposit service (G21) | savings deposits at the partner bank (G21) |
| mobile deposit service (G21) | overall formal banking savings (G21) |
| mobile deposit service (G21) | total household savings (D14) |
| transaction costs (D23) | usage of mobile deposit service (G21) |
| mobile deposit service utilization (G21) | traditional in-person deposits (G21) |