Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence from Savings Accounts

52 Pages Posted: 1 Apr 2019

See all articles by Stefan Hunt

Stefan Hunt

Financial Conduct Authority

Christopher Palmer

MIT Sloan; National Bureau of Economic Research (NBER)

Redis Zaliauskas

Lloyds Banking Group

Date Written: March 2019

Abstract

Disclosure—the practice of providing information to support decision making—has been widely mandated in public policy but is routinely ignored by consumers and subject to obfuscation by firms. Yet most evidence on the effectiveness of consumer financial disclosure stems from lab experiments where subjects do not have competing demands on their attention or from analysis of borrowing decisions where optimality is hard to characterize. In this paper, we provide field evidence from randomized-controlled trials with 124,000 savings account holders at five UK depositories. Treated consumers received varying degrees of salient information about alternative products, including one with their current provider that strictly dominated their current savings product. Motivated by work on search frictions, switching costs, and inattention, our experimental variation is designed to allow us to examine the importance of each in inhibiting effective disclosure. Despite the switching process taking 15 minutes on average and the moderate size of average potential gains (£123 in the first year), attention to disclosure is low, significantly limiting its potential effectiveness, motivating explicit disclosure-design rules, and demonstrating the nature of deposit stickiness.

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Suggested Citation

Hunt, Stefan and Palmer, Christopher and Zaliauskas, Redis, Testing the Effectiveness of Consumer Financial Disclosure: Experimental Evidence from Savings Accounts (March 2019). NBER Working Paper No. w25718. Available at SSRN: https://ssrn.com/abstract=3363454

Stefan Hunt

Financial Conduct Authority ( email )

25 The North Colonnade
Canary Wharf
London, E14 5HS
United Kingdom

Christopher Palmer

MIT Sloan ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Redis Zaliauskas

Lloyds Banking Group ( email )

10 Gresham Street
London, EC2V 7AE
United Kingdom

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