The Impact of Electronic Payments for Vulnerable Consumers: Evidence from Social Security

Abstract

Vulnerable consumers may face barriers to using electronic payments, especially consumers in “unbanked” households where no member has an account to receive payments. In March 2013, the US Social Security Administration transitioned exclusively to electronic payments, representing a large shift in payment mode mandated at the federal level. This study identifies the size and characteristics of the population impacted by this shift, by linking administrative data on Social Security payments to a nationally representative survey on the use of bank accounts and financial services. We find that the majority of unbanked Social Security recipients took up electronic payments well before the March 2013 deadline. The mandate does not appear to have increased the use of bank accounts. Instead, recipients used electronic payment cards. However, the transition to electronic payments was slowest among the most financially vulnerable households, suggesting a focus on these households as payment methods continue to develop.

How Does Consumers' Financial Vulnerability Relate to Positive and Negative Financial Outcomes? The Mediating Role of Individual Psychological Characteristics

“…In this regard, regulatory focus (Briley and Aaker ), time preference (Lynch and Zauberman ), propensity to plan for money (Lynch et al ), PSO (Dholakia et al ), financial self‐efficacy (Lown ), money management skills (Garðarsdóttir and Dittmar ), and individual differences in the consideration of future consequences (Joireman, Sprott, and Spangenberg ) are considered particularly relevant. Moreover, previous research supports the relevance of the individual risk factors of financial vulnerability as identified by the FCA () and the CFPB (), such as high‐debt levels (Wang ), being older or younger (Cui and Choudhury ; Griffiths and Harmon ; Moschis, Mosteller, and Fatt ), receiving welfare payments (Anderson, Strand, and Collins ; Litt et al ), suffering from physical disability (Kaufman‐Scarborough and Childers ; Rinaldo ), or coping with bereavement (Gentry et al ). However, the current literature is fragmented and (1) has not developed a comprehensive measure of financial vulnerability that integrates the various risk factors identified by policy makers; (2) has not engaged in a systematic examination of how such a measure would relate to key financial outcomes as well as the previously mentioned psychological characteristics; and (3) failed to examine how these psychological characteristics could mediate the associations between financial vulnerability and financial outcomes.…”

“…The FCA, in a report on consumer credit and consumers in vulnerable circumstances, considers vulnerable consumers as individuals who, due to personal circumstances, are especially susceptible to financial detriment. Although neither of these reports introduces a formal scale to measure the extent to which individual consumers are financially vulnerable, they do list a set of common risk factors of vulnerability, which is supported by previous consumer and public policy research (Cui and Choudhury ; Griffiths and Harmon ; Moschis, Mosteller, and Fatt ; Wang ; e.g., Anderson, Strand, and Collins ; Gentry et al ; Kaufman‐Scarborough and Childers ; Litt et al ; Rinaldo ). This set of risk factors forms the basis of the financial vulnerability measure we develop in this paper.…”

Consumer buying behavior, sense of security and basic economic knowledge among young consumers with ASD-Asperger syndrome: an exploratory study

“…On the other hand, there are situations where increased interest in innovations, for example, related to making payments, is forced on individuals by circumstances, e.g. a requirement for electronic payments with respect to salaries or social benefits (Anderson et al, 2018).…”

“Let Me Be Bill-free”: Consumer Debt in the Shadow of Incarceration

“…Once incarcerated, individuals with mental illness are less likely to be eligible for parole, more likely to finish their entire sentences, and more likely to be reincarcerated after release (Cloyes et al 2010; Lovell, Gagliardi, and Peterson 2002; Metraux 2008). Regardless of criminal justice involvement, people with mental illness are also more likely than others to live in deep poverty (Vick, Jones, and Mitra 2012) and are more likely to have unmanaged debt, particularly to costly AFS providers and to friends and family, and to have damaged credit (Anderson, Strand, and Collins 2017; Harper et al 2018). By focusing on this population, our study sheds light on the experiences of a particularly marginalized group.…”