Status Quo Bias and Usage of Financial Products

Last registered on April 29, 2020

View Trial History

Pre-Trial

Trial Information

General Information

Title

Status Quo Bias and Usage of Financial Products

RCT ID

AEARCTR-0005781

Initial registration date

April 28, 2020

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

April 29, 2020, 11:37 AM EDT

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

Locations

Country

Malawi

Region

Primary Investigator

Name

Xavier Gine

Affiliation

World Bank

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Jessica Goldberg

PI Affiliation

University of Maryland

Contact Investigator

Additional Trial Information

Status

Completed

Start date

2016-04-01

End date

2018-06-30

Keywords

Finance & Microfinance

Additional Keywords

Savings, status quo bias, field experiment, experience

JEL code(s)

D14, D91, C93, G21, O16

Secondary IDs

Abstract

We present a sample of savings account holders with three choices: to keep their existing account but incur high fees, to close their existing account and receive the balance, or to open a new account with lower fees and transfer the balance to it. These subjects come from 14 villages in southern Malawi. In 2012, as part of a previous study, they were offered fully subsidized basic savings accounts with a local bank. In 2015, some of those who had opened accounts were randomly chosen to receive a MK 25,000 windfall payment (USD 160 using the 2015 purchasing power parity [PPP] exchange rate. See Brune et al. 2017 for details). This transfer did not have persistent effects on savings or spending, but it did increase the number of transactions that subjects made at the bank branch. The random allocation of these transfers thus created exogenous variation in the experience subjects had in using their accounts.

In 2016, the previous research project concluded and subsidies for monthly account maintenance fees were discontinued. Starting in May 2016, individuals had to pay a monthly maintenance fee that had previously been covered by research funds paid directly to the bank. Concurrently but independently, the bank introduced a new account called the Pafupi account. This account had an opening cost, no monthly fees but charged a withdrawal fee per transaction. Based on the number of transactions that subjects had made between 2012 and May 2016, the Pafupi accounts were less expensive than the original (basic) accounts for everyone in the sample, if their usage patterns continued and they planned to keep the account open for at least another four months.

In March and April 2016, the research team visited study subjects at home and asked them to come to the bank branch to make a decision about their savings accounts. Subjects could keep their existing basic account and start paying monthly fees, could close their basic account, or could transfer their balances to a Pafupi account with the purchase of an ATM card. Although the Pafupi account was cheaper than the basic account given their past usage, the choice was presented in a neutral way.

External Link(s)

Registration Citation

Citation

Gine, Xavier and Jessica Goldberg. 2020. "Status Quo Bias and Usage of Financial Products." AEA RCT Registry. April 29. https://doi.org/10.1257/rct.5781-1.0

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

In March and April 2016, the research team visited study subjects at home and asked them to come to the bank branch to make a decision about their savings accounts. Subjects could keep their existing basic account and start paying monthly fees, could close their basic account, or could transfer their balances to a Pafupi account with the purchase of an ATM card. Although the Pafupi account was cheaper than the basic account given their past usage, the choice was presented in a neutral way.

The home visits introduced randomized variation in two dimensions of the decision. First, we varied the amount of a payment for coming to the branch, which was used to lower switching costs and encourage individuals to actively make a decision. Second, we varied the timing of when subjects were asked to visit the branch: some were asked to come within the week but others were asked to come only after a two-week delay. This manipulation assessed whether people would fail to show up at the branch due to forgetfulness or costs of paying attention. Finally, when they did visit the branch, some respondents received an unexpected extra payment, which tested whether liquidity constraints prevented individuals from paying the opening fee and purchasing the ATM card required to open the Pafupi account.

Intervention Start Date

2016-04-01

Intervention End Date

2016-05-30

Primary Outcomes

Primary Outcomes (end points)

Opening of Pafupi account;

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Visit to Bank to make decision about current account

Secondary Outcomes (explanation)

Experimental Design

We have five treatment groups: a no-bonus or date group, and four groups who could receive cash for coming to the bank within a designated window.

A final treatment was implemented at the bank branch. Some households were randomly selected to be offered MK 1,500 (USD 8 using the 2016 PPP exchange rate), a larger amount than the promised show-up fee. This amount was enough to pay for the MK 1,300 cost to open the Pafupi account and therefore relaxed a possible liquidity constraint. The offer, however, did not contain any explicit or implicit suggestion about how to use the money. All show-up bonuses were paid in cash before participants were asked about their decisions regarding the accounts.

Experimental Design Details

Randomization Method

The randomization was conducted by computer and stratified by village and previous treatment assignment.

Randomization Unit

Individual account holder

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

N/A

Sample size: planned number of observations

742 account holders of which we were able to interview 592.

Sample size (or number of clusters) by treatment arms

Of the 594 study participants, 187 did not receive the large transfer in 2015 and the rest did. For the 2016 interventions, the 594 subjects were randomized into treatment arms as follows: 125 without show-up bonus, 81 with 500 MK show-up bonus and immediate window, 147 with 500 MK show-up bonus and delayed window, 78 with 1000 MK show-up bonus and immediate window, 163 with 1000 MK show-up bonus and delayed window.

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

We can detect a minimum increase in the proportion of individuals that received a transfer and opened a Pafupi account of 0.05 compared to the proportion of 0.37 among those that did not receive a transfer. The actual increase in the proportion was 0.18 and thus we were powered. for this simple comparison.

Supporting Documents and Materials

IRB