Investigating the Introduction of a Regulatory Fintech Advancement Designed to Reduce Limited Attention Regarding Inactive Saving Accounts – Data, Survey, and Field Experiment

Abstract

Dynamic global job markets and the increasing variety and complexity of worldwide retirement savings systems resulted in many lost and forgotten retirement savings accounts. This paper uses proprietary data, survey data and a field experiment to study the introduction of a unique fintech advancement – a centralized new website created by the Israeli regulator to help individuals find inactive retirement savings accounts and close them (i.e., withdraw the savings or transfer them to active accounts). The website lowered the information search costs. This regulatory fintech advancement was complemented with a new tax exemption designed to encourage the closing of inactive accounts in provident funds because of new minimum fees that came into effect. The government’s efforts reduced limited attention but did not eliminate it: Proprietary data indicate that those who closed the inactive accounts live in proximity to the country’s urban economic centers and in areas with a higher socioeconomic index than those who retained them. Survey data indicate that those who lacked financial literacy and confidence in their financial knowledge (proxies for costs) were less likely to act. The results of a controlled field experiment indicate that an intervention with a human touch can promote greater involvement and suggests that part of the limited attention is behavioral.

Keywords: limited attention; retirement savings; financial literacy; financial regulation; fintech; field experiment

JEL Classification: D12, D14, D83, D91, G28, G40, J32