The real effects of electronic wage payments: An experiment with salaried factory workers in Bangladesh

• This study investigated whether employers can assist their workers in developing basic financial capability through the use of electronic wage payments.
• We tested whether direct deposits have an effect on workers’ savings, remittances, consumption and use of credit.
• Digital wage payments increased savings and the ability to cope with unanticipated shocks. All treatments appeared to increase general trust in financial intermediaries, especially the mobile money platforms.
• There are many policies that make it difficult for most garment factory workers to access accounts; certain changes to Bangladesh Bank policy would facilitate provision of electronic wage payments and payroll accounts.

Approximately 2.5 billion people around the world are cut off from digital financial systems. These adults –most of them poor– must rely on cash to manage their day-to-day finances and plan for the future. Researchers and policymakers increasingly view the migration of poor households to electronic payment platforms as an essential ingredient in expanding financial inclusion among the poor.

In this study, we partnered with garment factories in Bangladesh, a local bank, and a mobile payment provider to ask the novel and important question: Can employers assist their workers in building basic financial capability by offering electronic wage payments?

Results showed that direct deposits led to increased formal savings, especially for those who previously did not have a formal account. We also saw that account balances increased over time as workers became more comfortable with accounts.

Workers who received direct deposits tended to allow their balance to increase slowly over time by not withdrawing their full salary each month. People who received bank accounts without direct deposits, on the other hand, tended to deposit one large lump sum, and then did not use the account frequently after that. Our preliminary analysis shows that women saved more in bank accounts than in mobile accounts, while this difference was not as stark for men.

Our study can help banks and other financial institutions design effective electronic payroll products that encourage greater use of deposit accounts.