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Working Paper
Prior Fraud Exposure and Precautionary Credit Market Behavior
We study how past experiences with privacy shocks affect individuals’ likelihood to take precautionary behavior when faced with a new privacy shock in the context of credit markets. We focus on experiences with identity theft and data breaches, two kinds of privacy shocks that either directly lead to fraud or put an individual at an elevated risk of experiencing fraud. We show that immediately after the announcement of the 2017 Equifax data breach, individuals with either kind of prior fraud exposure were more likely to freeze their credit report and close credit card accounts than ...
Journal Article
Mobile Banking Use and Consumer Readiness to Benefit from Faster Payments
The U.S. payments industry is currently implementing faster payments that will enable consumers and businesses to send and receive payments almost instantly at any time of day, any day of the year. Mobile banking in particular may allow consumers to realize the full benefits of faster payments. As a result, a consumer’s use of mobile banking is a good indicator of their readiness to benefit from faster payments.Fumiko Hayashi and Ying Lei Toh examine which consumer characteristics are associated with mobile banking use as well as what other factors may influence consumer readiness. They ...
Journal Article
Addressing Traditional Credit Scores as a Barrier to Accessing Affordable Credit
Affordable credit enables consumers to better manage their finances, cope with unexpected emergencies, and pursue opportunities such as entrepreneurship or higher education. However, many consumers face difficulties obtaining the credit they need. A major impediment is lenders’ reliance on traditional credit scores to assess consumers’ creditworthiness. These credit scores affect not only loan approval decisions but also the interest rates consumers pay on their loans. While credit scores are intended to help lenders make informed decisions about consumers’ risk of default, they do not ...
Working Paper
Prior Fraud Exposure and Precautionary Credit Market Behavior
This paper studies how past experiences with privacy shocks affect individuals' take-up of precautionary behavior when faced with a new privacy shock in the context of credit markets. We focus on experiences with identity theft and data breaches, two kinds of privacy shocks that either directly lead to fraud or put an individual at an elevated risk of experiencing fraud. Using the announcement of the 2017 Equifax data breach, we show that individuals with either kind of prior fraud exposure were more likely to freeze their credit report and close credit card accounts than individuals with no ...
Journal Article
Prepaid Cards: An Inadequate Solution for Digital Payments Inclusion
Although prepaid cards have the potential to address digital payments exclusion, their use among unbanked households remains low.
Briefing
How Much Do Nonbank Transaction Accounts Improve Access to Digital Payments for Unbanked Households?
Nonbank transaction accounts—such as prepaid card accounts or accounts with online payment service providers—can help unbanked households make safe and affordable digital payments. But data suggest that they may not be sufficient to achieve digital payments inclusion. Less than half of unbanked households had these accounts in 2021; the rest either used paper-based transaction products or relied solely on cash.
Working Paper
Privacy Regulation and Quality Investment
This paper analyzes whether a privacy regulation that restricts a dominant firm?s data disclosure level harms the firm?s incentives to invest in service quality and thereby harms social welfare. We study how the regulation affects the privacy and quality choices of a monopoly service provider, who derives revenues solely from disclosing user data to third parties, as well as how those choices in turn affect consumers? participation and information-sharing decisions. We show that the regulation does not always harm investment incentives; moreover, even when it does, it may still improve social ...
Working Paper
Which Types of Unbanked Households Are More (or Less) Likely to Open a Bank Account?
Using multi-year survey data, we conduct a regression model analysis to examine which types of unbanked households are more likely to open a bank account and which types are less likely. We proxy for households’ likelihood of opening a bank account using their prior banking status and interest in having a bank account. Unbanked households who previously had a bank account and are interested in having a bank account are more likely to open an account. These households tend to be more educated, to be native-born, to use alternative financial services, and to have access to digital technology. ...
Briefing
Still on Trial? The Court’s Use of Economic Analysis in the American Express Case
In a 2018 antitrust case, the Supreme Court ruled that American Express did not break federal laws in prohibiting merchants from steering consumers to alternative payment methods. However, some antitrust scholars disagree with how the court defined the relevant market and determined anticompetitive effects, and are concerned that the decision will make it more difficult to bring antitrust cases against payment platforms in the future.
Briefing
Assessing the Case for Retail CBDCs: Central Banks’ Considerations
Many central banks around the world have been researching, experimenting, or developing central bank digital currencies (CBDCs). Although central banks in several emerging markets and developing economies have implemented or plan to implement a general-purpose, or retail, CBDC to promote financial inclusion and improve their payment systems, central banks in many advanced economies have not yet found a compelling case for a retail CBDC.