Do mandated financial disclosures help people make better choices?
Regulators operate on the assumption that making select financial terms on loan products easier to access and salient to process helps borrowers make better choices. In this talk, I propose that improved access is a double-edged sword.
In a first set of laboratory choice studies, I will present results that examine whether the provision of credit card terms and conditions in an easy-to-read table (the so called Schumer boxes) and making the borrowing costs salient can help a subset of consumers. However, for people who use the card only for convenience, the salience of borrowing costs might actually backfire.
In a second set of incentive-compatible studies using a realistic replica banking website, we tasked participants with finding the best credit card onsite. We randomly varied whether the costs of borrowing was relevant to their financial situation, as well as the accessibility of this information. Improved access led to better choices when costs were relevant and worse ones otherwise. Clickstream data show the effect arises because participants are exposed to more cost information with easier access, and that the effect is exacerbated with higher financial literacy.
Dr. Dilip Soman - Biography
Dilip Soman (University of Toronto) is a Canada Research Chair in Behavioural Science and Economics, and has served as a Director of the Behavioural Economics in Action Research Centre at Rotman [BEAR], as well as the India Innovation Institute. His research is in the area of behavioural science and its applications to consumer wellbeing, marketing and policy. He is the author of The Last Mile [University of Toronto Press, 2015] and Managing Customer Value [World Scientific, 2022], as well as the editor / co-editor of Innovating for the Global South [2014], The Behaviorally Informed Organization [2021], Behavioral Science in the Wild [2022], Cash Transfers for Inclusive Societies [2023] and What Works, What Doesn’t (and When) [2024]. He is interested in research on poverty, financial wellbeing, global health, education and development in the global south. In his past life, he has degrees in engineering and management, worked in sales and advertising, consulted for several organizations, and taught at Colorado, Hong Kong and now in Toronto. When not working, his interests include theater, photography, (the longer version of) cricket, taking weekends seriously and procrastination.
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