Driver of choice? the cost of financial products for unbanked consumers

Josh Hanson, Fumiko Hayashi and Jesse Maniff

No RWP 15-15, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: This paper examines whether some of the unbanked consumers' choice of general purpose reloadable (GPR) prepaid cards over checking accounts and alternative financial service (AFS) products can be explained by the cost incurred by those consumers. We compare the three types of products by constructing consumer models based on the actual behavior of GPR prepaid cardholders and applying those models to the fee schedules of actual products offered in the market. Overdrafts are a major factor affecting the cost rankings. For consumers who regularly or occasionally overdraw their accounts, checking accounts are more costly than GPR cards or AFS products. In contrast, for consumers who do not need overdraft capability and short-term credit, GPR cards are more costly than checking accounts. The cost difference across the products clearly explains the former type of consumers' choice of financial products, while it does not explain the latter type of consumers' choice.

Keywords: General purposes reloadable prepaid cards (GPR); Checking accounts; Alternative financial services (AFS); Overdraft; Unbanked (search for similar items in EconPapers)
JEL-codes: D12 E42 G21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-11-01
New Economics Papers: this item is included in nep-mac, nep-mkt, nep-pay and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.kansascityfed.org/documents/337/pdf-rwp15-15.pdf Full-text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedkrw:rwp15-15

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Research Working Paper from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens ().