Low-Income Consumers and Payment Choice

Shy, Oz

doi:10.2139/ssrn.3535199

Download This Paper

Open PDF in Browser

Add Paper to My Library

Low-Income Consumers and Payment Choice

20 Pages Posted: 8 Mar 2020 Last revised: 2 Oct 2020

See all articles by Oz Shy

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

There are 2 versions of this paper

Date Written: October 1, 2020

Abstract

Low-income consumers are not only constrained with spending, but also with the type and variety of payment methods available to them. Using a representative sample of the U.S. adult population, this short article analyzes the low possession (adoption) of credit and debit cards among low-income consumers who are also unbanked. Using a random utility model, I simulate the potential consumer welfare gains associated with policy options suggested in the literature to provide unsubsidized or subsidized debit cards, or subsidized prepaid cards to this consumer population. Simulation results show the relative improvement in consumer welfare among all three policy options.

Keywords: Consumer payment choice, household income, financial inclusion, unbanked consumers.

JEL Classification: D9, E42

Suggested Citation: Suggested Citation

Shy, Oz, Low-Income Consumers and Payment Choice (October 1, 2020). Available at SSRN: https://ssrn.com/abstract=3535199 or http://dx.doi.org/10.2139/ssrn.3535199