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Stored-value cards: challenges and opportunities for reaching emerging markets
In recent years, the financial services industry has become very inventive around new uses of technology to improve the structure and delivery of retail products. One relatively new type of payment product, stored value cards (SVCs), serves as a cash or check alternative. At this point in the industry's development, many of these cards do not provide a platform for saving, saving, building assets, or establishing (or repairing) credit. However, SVCs could pave the way for individuals to have both transactional services and links to broader financial opportunities. This paper discusses the implications of this emerging product for unbanked and underbanked consumers, explores the hypothesis that SVCs can offer consumers the potential to build assets and improve their credit records, and presents policy issues that may affect how the SVC market evolves. Questions for further research to facilitate the development of SVCs that better serve unbanked and underbanked consumers are also discussed.
AUTHORS: Tescher, Jennifer; Jacob, Katy; Rhine, Sherrie L. W.; Su, Sabrina
Householder response to the earned income tax credit: path of sustenance or road to asset building
This study seeks to gain a more complete picture about how the Earned Income Tax Credit program influences consumer expenditure and saving decisions. Based on survey data collected from over 18,000 taxpayers participating at the Volunteer Income Tax Assistance sites administered by the Community Food Resource Center, a nonprofit organization in New York City, we find that a fairly large proportion of lower-income taxpayers expect to use the majority of their refund for the purpose of paying debt and other more immediate expenses. Even so, almost 11 percent of these taxpayers reported that they would save a majority of their refund. ; The results from the empirical investigation determine that unbanked taxpayers are significantly more likely to open a low-cost savings account and that opening an account is positively related to the size of the refund. Evidence is also offered to show that nonprofit organizations can and do play an important role in helping to move lower income consumers into the financial mainstream and potentially facilitating asset-building behavior. This study helps inform policy by contributing to the growing body of literature about programs that encourage participation in the financial mainstream.
AUTHORS: Rhine, Sherrie L. W.; Su, Sabrina; Osaki, Yazmin; Lee, Steven