Child Benefit Support and Method of Payment: Evidence from a Randomized Experiment in Belgium


American Economic Journal: Economic Policy

May 2010, vol. 2, n°2, pp.163-184

Departments: Strategy & Business Policy

Keywords: Payment methods, Children, Mailings, Payments, Bank accounts, Public assistance programs, Information standards, Economic policy, Electronic payments, Checks

We examine the effects of information and information presentation format on individuals choice of payment method in a large ran domized experiment carried out with the Belgian National Office for Family Benefits. We find that a one-time mailing providing information about method of payment for child benefit support caused a fourfold increase in parents' decision to switch from payment by check to electronic payment. Simple, low-cost supplements significantly raised people's responsiveness to the mailing. Our results suggest that complexity and information (processing) costs pose significant barriers to transitioning to electronic payment methods, and that deliberate efforts to lower these costs can contribute to large behavioral changes