Abstract

http://ssrn.com/abstract=1810082
 


 



Preferences for Banking and Payment Services Among Low- and Moderate-Income Households


Michael S. Barr


University of Michigan Law School

Jane Dokko


Board of Governors of the Federal Reserve System (FRB)

Eleanor McDonnell Feit


Drexel University - Department of Marketing

January 1, 2011

FEDS Working Paper No. 2011-13
U of Michigan Law & Econ, Empirical Legal Studies Center Paper No. 11-007
U of Michigan Public Law Working Paper No. 238

Abstract:     
This paper characterizes the features of an account-based payment card – including bank debit cards, prepaid debit cards, and payroll cards – that elicit a high take-rate among low- and moderate-income (LMI) households, particularly those without bank accounts. We apply marketing research techniques, specifically choice modeling, to identify the design of a specific financial services product for LMI households, who often face difficulties maintaining standard bank accounts but need banking services. After monthly cost, we find that, on average, non-monetary features of a payment card, such as the availability of federal protection and the type of card, are factors LMI consumers weigh most heavily when choosing among differently designed payment cards. We estimate a high take rate for a well-designed payment card that is decreasing in its cost. The sensitivity of the take-rate with respect to cost varies by income and bank account ownership. These results can guide private and public sector initiatives to expand the range of financial services available to LMI households.

Number of Pages in PDF File: 42

Keywords: poverty, banking regulation, consumer protection, choice modeling, conjoint

JEL Classification: D1, G2

Accepted Paper Series





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Date posted: April 17, 2011 ; Last revised: June 3, 2011

Suggested Citation

Barr, Michael S. and Dokko, Jane and Feit, Eleanor McDonnell, Preferences for Banking and Payment Services Among Low- and Moderate-Income Households (January 1, 2011). FEDS Working Paper No. 2011-13; U of Michigan Law & Econ, Empirical Legal Studies Center Paper No. 11-007; U of Michigan Public Law Working Paper No. 238. Available at SSRN: http://ssrn.com/abstract=1810082

Contact Information

Michael S. Barr (Contact Author)
University of Michigan Law School ( email )
625 South State Street
Ann Arbor, MI 48109-1215
United States
734-936-2878 (Phone)
734-936-7514 (Fax)
Jane K. Dokko
Board of Governors of the Federal Reserve System (FRB) ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Eleanor McDonnell Feit
Drexel University - Department of Marketing ( email )
United States
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