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The effect of debit card use on spending: evidence from a field experiment

flexible loans

  • Researchers:
    • Michael King and Paolina C. Medina

  • Partners:
    • Banorte Bank

  • Location:
    • Mexico

  • Sample:
    • 1.6 million clients

  • Timeline:
    • 2019-2020

  • Theme:
    • Psychology of spending and choice of payment method.

  • Description:
    • This project studies how the choice of a payment method affects total individual spending. Using detailed administrative data from a large field experiment incentivizing bank clients to pay with their debit cards, we test the competing predictions of several behavioural and rational models. According to these models, individuals spend more, less or the same when they pay with debit cards, cash or credit cards. As the adoption of electronic payment methods grows around the world, the direction of our results has direct implications for the personal finances of vulnerable households, as well as for monetary and fiscal policy  to stimulate consumption in the economy.