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27-10-2023

Unbanked consumers and how they pay

Authors: Claire Greene, Oz Shy

Published in: Journal of Economics and Finance

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Abstract

We utilize a representative sample of the U.S. adult population to analyze how unbanked consumers make payments for goods and services and how they pay their bills.

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Footnotes
1
Data and summary reports are available for downloading from https://​www.​atlantafed.​org/​banking-and-payments/​consumer-payments/​survey-and-diary-of-consumer-payment-choice The data include weights for adjusting the data to a nationally representative sample, see the section on weighting in Foster and Diallo (2023).
 
2
According to Demirgüç-Kunt et al (2022), the following countries had close to 100 percent banked adults in 2021: Austria, Canada, Denmark, Finland, Germany, Ireland, and U.K. Countries with over 98 percent include Belgium, France, Japan, Netherlands, New Zealand, and others.
 
3
Access to electronic payment systems by unbanked consumers is analyzed in Hayashi (2016). The ability to pay with a payment instrument depends on whether the consumer has access to (adopts) the particular payment instrument. Adoption of payment methods by consumer group is analyzed in Greene and Shy (2022, 2023).
 
4
In view of the top panel in Table 2, payments made from a bank account consist of checks, debit cards, bank account number, and online banking bill payments. The shares of the unbanked are 0.1, 13.8, 0, and 0.2 percent, respectively. For banked consumers the shares are 3.9, 30.8, 7.2, and 6.2, respectively.
 
5
The economics literature on cash is surveyed in Shy (2023). Rogoff (2016) argues that large denomination notes should be eliminated since they are also used for illegal trading. In contrast, McAndrews (2017) and Hendrickson and Park (2021) argue that eliminating large denominations is not optimal for reducing illegal trading. Alvarez et al (2022) find that the private costs of heavily taxing the use of cash in Mexico outweigh the social benefits.
 
6
Based on data from Malawi, Chile, and Uganda, Dupas et al (2018) suggest that policies merely focused on expanding access to basic bank accounts are unlikely to improve welfare noticeably on average. Boel and Zimmerman (2022) review the literature on access to transaction accounts in the United States.
 
7
Bluebird card, Walmart’s MoneyCard, and NetSpend in the U.S. provide bank-like services with the use of reloadable prepaid/debit cards, see https://​www.​bluebird.​com, https://​www.​walmartmoneycard​.​com/​, and https://​www.​netspend.​com. Neobanks such as Chime, Dave and Acrons are fintech companies that offer bank-like services through their online and mobile banking apps, see https://​www.​chime.​com, https://​dave.​com, https://​www.​acorns.​com. PayNearMe allows consumers to make bill payments by paying cash at over 40,000 participating retail locations in the U.S, see https://​home.​paynearme.​com. The Octopus card is commonly used in Hong Kong as a cash replacement. The card can be funded by physical cash or a bank account and operates offline and online, see https://​www.​octopus.​com.​hk/​en/​consumer/​octopus-cards/​products/​on-loan/​standard.​html.
 
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Metadata
Title
Unbanked consumers and how they pay
Authors
Claire Greene
Oz Shy
Publication date
27-10-2023
Publisher
Springer US
Published in
Journal of Economics and Finance
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-023-09648-5