The Impact of Price and Messaging on Bank Overdraft Usage in Turkey

Last registered on October 28, 2016
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Pre-Trial

Trial Information

General Information

Title
The Impact of Price and Messaging on Bank Overdraft Usage in Turkey
RCT ID
AEARCTR-0001622
Initial registration date
October 28, 2016

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
October 28, 2016, 8:33 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Turkey
Region
Europe

Primary Investigator

Name
Dean Karlan
Affiliation
Northwestern University
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Other Primary Investigator(s)

PI Name
Jonathan Zinman
PI Affiliation
Dartmouth College
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PI Name
Mehmet Cemalcilar
PI Affiliation
Koc University
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PI Name
Sule Alan
PI Affiliation
University of Essex
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Additional Trial Information

Status
Completed
Start date
2012-08-30
End date
2013-06-30
Keywords
Finance & Microfinance
Additional Keywords
contingent charges, deceptive advertising, transaction-linked credit, small-dollar loans, consumer banking, retail banking, deposit accounts
JEL code(s)
D12, D14, G2
Secondary IDs
Abstract
The pricing and advertising of tied add-ons and overages have come under increasing scrutiny. Working with a large Turkish bank to test SMS direct marketing promotions to 108,000 existing holders of "free" checking accounts, we find that promoting a large discount on the 60% APR charged for overdrafts reduces overdraft usage. In contrast, messages mentioning overdraft availability without mentioning price increase usage. Neither change persists long after messages stop, suggesting that induced overdrafting is not habit-forming. We discuss implications for interventions to promote transparency in pricing and advertising, and for models of shrouded equilibria, limited attention, and salience.
External Link(s)
J-PAL Evaluation Summary

Registration Citation

Citation
Alan, Sule et al. 2016. "The Impact of Price and Messaging on Bank Overdraft Usage in Turkey." AEA RCT Registry. October 28. https://doi.org/10.1257/rct.1622-1.0
Former Citation
Alan, Sule et al. 2016. "The Impact of Price and Messaging on Bank Overdraft Usage in Turkey." AEA RCT Registry. October 28. https://www.socialscienceregistry.org/trials/1622/history/11532
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
Yapi Kredi delivered each client a combination of SMS messages, randomized on four levels. First, (1) YK sent half of the sample an "overdraft availability reminder" message that mentions the overdraft service and credit line but nothing about its cost. Second, (2) YK sent each person in the sample one of six randomly assigned message combinations. Half of the sample received an "overdraft interest discount" message; either with no further information, or in combination with information about an auto-debit discount or a debit card discount. Among the clients not sent an "overdraft interest discount" message, some received information about the auto-debit discount only, the debit card discount only, or simply the overdraft availability reminder message (as in 1). Furthermore, a frequency randomization (3) determined whether YK repeated the message frequently (every 10 days), less-frequently (every 20 days), or not at all during the campaign period. A final duration randomization (4) determined whether the price promotion or overdraft availability reminder, and any related messaging subsequent to the intervention, lasted through the intervention period.
Intervention Start Date
2012-08-30
Intervention End Date
2012-12-15

Primary Outcomes

Primary Outcomes (end points)
Overdraft amount used, Days with overdraft balance
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
Researchers partnered with the Turkish bank Yapi Kredi to conduct several randomized evaluations examining the impact of SMS reminders and price discounts on clients' overdraft usage. Researchers randomly assigned 108,000 checking account holders to receive SMS messages regarding overdraft services. They compared the impact of the various messages, in attempt to understand how messages about different types of financial products affect recipients' overdraft usage.
Experimental Design Details
Randomization Method
Stratified randomization using STATA
Randomization Unit
Clients (individuals)
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
108,000 clients
Sample size: planned number of observations
108,000 clients
Sample size (or number of clusters) by treatment arms
Please see supporting documents for the experimental design and sample size by treatment arm.

(1) Overdraft availability reminder (n=54,000)

(2) Overdraft interest discount group total (n=53,953)
- Overdraft availability, no other discount (n=17,977)
- Overdraft availability + auto-pay discount (n=17,981)
- Overdraft availability + debit card discount (n=17,995)
No overdraft interest discount group total (n=54,047)
- Auto-pay discount only (n=18,021)
- Debit card discount only (n=17,983)
- Overdraft availability reminder; randomized in (1) (n=18,043)

(3) Frequent messaging (n=35,985)
Less-frequent messaging (n=36,052)
No follow up messaging (n=35,963)

(4) Short duration of messaging (n=54,044)
Long duration of messaging (n=53,056)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials

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IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
December 15, 2012, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
June 30, 2013, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
108,000 clients
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
108,000 clients
Final Sample Size (or Number of Clusters) by Treatment Arms
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey
Citation
Alan, Sule, Mehmet Cemalcilar, Dean Karlan, and Jonathan Zinman. "Unshrouding Effects on Demand for a Costly Add-on: Evidence from Bank Overdrafts in Turkey." NBER Working Paper No. 20956, January 2016
URL
https://www.povertyactionlab.org/sites/default/files/publications/986%20Bank%20Overdrafts%20Turkey%20Jan2016.pdf

Reports & Other Materials