Working Paper: NBER ID: w25718
Authors: Paul D. Adams; Stefan Hunt; Christopher Palmer; Redis Zaliauskas
Abstract: 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.
Keywords: Consumer Financial Disclosure; Savings Accounts; Inattention; Switching Behavior; Randomized Controlled Trials
JEL Codes: D14; D83; E21; G28; M38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Psychological costs and cognitive overload (D91) | Limit effectiveness of disclosures (G38) |
| Varying degrees of salient information disclosed about alternative savings products (G51) | Different levels of consumer switching behavior (D11) |
| Higher interest rates available from competing products (E43) | Increase in switching behavior (D91) |
| Simplifying the switching process (C34) | Increase in likelihood of switching (C34) |
| Timing of disclosures relative to rate changes (E43) | Consumer responsiveness (D16) |