FinTech for Macroeconomists
Saturday, Jan. 4, 2020 8:00 AM - 10:00 AM (PDT)
- Chair: Francesco D'Acunto, Boston College
The Value of Mobile Payment Technology
AbstractUsing a representative sample of 250,000 consumers from a leading bank in Singapore, this paper studies the impact of cashless payment technology on household spending behavior. We utilize the introduction of the Quick Response (QR) code payment function in the mobile wallet, a cashless payment technology that exogenously facilitated the usage of the mobile wallet of our bank. Our difference-in-differences analysis shows that consumers with mobile wallet accounts before the QR code introduction significantly increased their mobile wallet usage and decreased their cash withdrawal amount (frequency) by 5% (2%) after the event. The reduction in cash withdrawal is stronger during the first week following the payday, when consumers intensively conduct cash withdrawal. We also find an increase in total spending among the treatment group by 1.7%, mainly driven by spending through credit cards. We do not find significant increase in credit card debt among the treatment group after the event.
Perceived Precautionary Savings Motives: Evidence from FinTech
AbstractWe study the consumption response to the provision of credit lines to individuals that previously did not have access to credit combined with the possibility to elicit directly a large set of preferences, beliefs, and motives. As expected, users react to the availability of credit by increasing their spending permanently and reallocating consumption from non-discretionary to discretionary goods and services. Surprisingly, though, liquid users react more than others and this pattern is a robust feature of the data. Moreover, liquid users lower their savings rate, but do not tap into negative deposits. The credit line seems to act as a form of insurance against future negative shocks and its mere presence makes users spend their existing liquidity without accumulating any debt. By eliciting preferences, beliefs, and motives directly, we show these results are not fully consistent with models of financial constraints, buffer stock models with and without durables, present-bias preferences, uncertainty about future income, bequest motives, or the canonical life-cycle permanent income model. We label this channel the perceived precautionary savings channel, because liquid households behave as if they faced strong precautionary savings motives even though no observables suggest they should based on standard theoretical models.
- E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
- D1 - Household Behavior and Family Economics