Digital Financial Services Go a Long Way: Transaction Costs and Financial Inclusion

Abstract

Debit cards reduce the travel distance to access bank accounts and can increase financial inclusion. We show that in Mexico, cash transfer beneficiaries who already received their transfers in bank accounts and subsequently received debit cards reduce their median distance to access the account from 4.8 to 1.3 kilometers and report being less likely to forgo important activities (childcare, work) to withdraw their transfer. Using account level data, we find a strong negative correlation between the reduction in travel distance and financial activity: beneficiaries facing the largest reductions in distance increase both their number of withdrawals and their savings balances.

How Debit Cards Enable the Poor to Save More

“…5 After receiving the card, each beneficiary could withdraw their balance from any bank's ATM, i.e. at any of the more than 27,000 ATMs in Mexico; the median road distance between a beneficiary's house and the closest ATM is 1.3 kilometers (Bachas et al, 2018). We find that the number of withdrawals made per month jumps by 40% immediately after receiving the card and stays relatively flat afterwards.…”

Incidence of the Digital Economy and Frictional Unemployment: International Evidence

“…The ITU variable is appealing for its cross-country and over-time coverage, but it might not be a good proxy for the incidence of the digital economy as it does not contain information about the purpose of the use of the internet, or whether it is used to conduct economic transactions. Consequently, we also use another proxy variable that concerns the use of the internet for economic transactions, and thus is consistent with the data used in Bachas et al (2018), Higgins (2018), and Jack and Suri (2014). It is the percentage of the adult population (aged 15 or more) that used the internet to pay bills or make purchases during in the previous 12 months prior to the survey (conducted by Gallop in collaboration with the World Bank).…”

“…The observed changes in use of Internet suggest two things: new types of jobs may have been created both via new Internet users as well as different use of Internet by existing users. Bachas et al (2018) research the effects that payments systems can have on employment in Mexico, specifically studying a natural experiment in which debit cards tied to existing savings accounts were rolled geographically over time to beneficiaries of the Mexican cash transfer program, Oportunidades. Prior to receiving debit cards, beneficiaries received transfers into a savings account every two months.…”

“…Also in Mexico, Higgins (2018) finds that when the Mexican government began providing debit cards to cash transfer recipients in urban areas, small retailers responded by adopting point of sale (POS) terminals to accept card payments. The number of POS terminals then increased in local areas by 18 percent relative to areas that had not been transformed.…”

Does Entrepreneur Innovativeness Moderate The Relationship Between Strategic Orientation And Financial Inclusion?

“…Financial inclusion variable: Financial inclusion is measure using the parameters of access and use of quality financial services, is assessed using two perspectives; digital financial inclusion (Koh, Phoon, & Ha, 2018;Ouma, Odongo, & Were, 2017;Zins & Weill, 2016) and traditional financial inclusion (Camara & Tuesta, 2014;World Bank, 2014). Digital financial inclusion entails measuring the individual easiness to access mobile money agents, receive payments, and mobile money transfers (Bachas, Gertler, Higgins, & Seira, 2018;Ouma et al, 2017). In the same regard, traditional financial inclusion was measured using the parameters of access and use of quality financial services of financial institutions (Demirguc-Kunt et al, 2018;We summated the measures of both the scales to create the financial inclusion indicator for this study.…”