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

  • Preliminary results suggest that treatments — introducing employee payroll accounts and electronic wage payments — “worked” to stimulate the use of formal financial products.

  • Detectable increases in savings were found in both bank treatments.

  • The mobile money treatments did not have very strong long-run impacts on total savings accumulation, consistent with the typical usage patterns of mobile money accounts, and low incidence of savings accumulation in the mobile wallet.

  • Electronic wage payments likely did help workers better respond to shocks.

  • All treatments appeared to increase general trust in financial intermediaries, especially the mobile money platforms.

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?

We conducted a randomised controlled trial (RCT) to investigate this question where we introduced i) employee payroll accounts and ii) electronic wage payments. First, does automatically depositing wages in a formal bank account improve an agent’s ability to save, thus facilitating either lumpy investment or improved self-insurance? Second, does the impact vary by whether the electronic wage payment is made to a bank account or to a mobile money account linked to the worker’s phone? We also aimed to evaluate whether electronic wage payments translate into improved worker attendance and productivity, either through induced savings or changes in borrowing behaviour.