Working Paper: NBER ID: w23798
Authors: Bruce Carlin; Arna Olafsson; Michaela Pagel
Abstract: This paper analyzes how better access to financial information via new technology changes use of consumer credit and affects financial fitness. We exploit the introduction of a smartphone application for personal financial management as a source of exogenous variation. FinTech adoption reduces financial fee payments and penalties, but differs cross-sectionally in the population. After adopting the new technology, Millennials and members of Generation X incur fewer financial fees and penalties, whereas Baby Boomers do not benefit from the technological advance. Millennials and Gen Xers save fees by using their credit cards rather than overdrafts to manage short-term liabilities. Moreover, Millennials shift some of their spending to discretionary entertainment, whereas members of Generation X remain more austere. Finally, while men tend to adopt new technology and access information at a higher rate, the economic impact of access is larger for women.
Keywords: Fintech; Consumer Credit; Financial Fitness; Generational Differences
JEL Codes: D14; D83; G02
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Smartphone application for personal financial management (G50) | improved access to financial information (G29) |
| Improved access to financial information (G29) | reduction in financial fees and penalties (G28) |
| Smartphone application for personal financial management (G50) | reduction in financial fees and penalties (G28) |
| Improved access to financial information (G29) | growth in credit card use relative to debit cards (E40) |
| Smartphone application for personal financial management (G50) | growth in credit card use relative to debit cards (E40) |
| Smartphone application for personal financial management (G50) | differential effect based on gender (J16) |