American Economic Review: Papers & Proceedings 2013, 103(3): 387–392
http://dx.doi.org/10.1257/aer.103.3.387

Deposit Collecting: Unbundling the Role of Frequency, Salience,and Habit Formation in Generating Savings †By Suresh de Mel, Craig McIntosh, and Christopher Woodruff*

Deposit collectors are common in many
countries (Ashraf, Karlan, and Yin 2006). Poor
households prove willing to pay for services
such as Chit collectors in India or Susu collectors in Western Africa, indicating the value of
illiquid savings to those whose financial lives
are transacted largely in cash (Rutherford 2000).
While small-scale deposit collection can provide
a valuable service to households, it is unlikely
to create the same multiplier effects as savings
that are on-lent through modern financial institutions. For this reason, a service that could link
deposit collection to the formal banking sector
would hold the promise of benefitting both savers and the broader economy through improved
intermediation.
To examine this, we conducted an experimentin which employees of the National Savings
Bank (NSB) worked as deposit collectors for
12 months in semirural areas of Sri Lanka. NSB
employed a technological innovation to deliver
remote banking services in a highly credible
way: a mobile POS device links the agent tothe bank’s computer system via the mobile telecom network, allowing the depositor to receivea receipt providing full account information,* De Mel: Department of Economics, University of
Peradeniya, Peradeniya 20400, Sri Lanka (e-mail: demel.
suresh@gmail.com); McIntosh: Graduate School ofInternational Relations and Pacific Studies, University ofCalifornia-San Diego, La Jolla, CA 92093 (e-mail: ctmcintosh@ucsd.edu); Woodruff: Department of Economics,
University of Warwick, Coventry CV4 7AL, UK (e-mail:c.woodruff@warwick.ac.uk). This project would not be
possible without the collaboration of the National Savings
Bank, particularly the Bandarawela and Mahiyangana
branches, or without funding provided by the Consortiumfor Financial Services and Poverty (CFSP) and the Centerfor Competitive Advantage in the Global Economy. We
thank Mike Callen for assistance with the project,and Shawn
Cole for comments. Kandy Consulting Group carried out allof the surveys and treatment logistics.
†
To view additional materials, and author disclosurestatement(s),visit the article page at
http://dx.doi.org/10.1257/aer.103.3.387.
387

including the amount of the latest deposit.
Withdrawals can be made only at the bank, providing a form of savings commitment via asymmetric costs of deposit and withdrawal. Weekly
home visits by the POS agents resulted in significant increases in bank savings and overallsavings, as reported in Callen et al. (2012).
While frequent visits by POS-enabled bankagents are effective at increasing savings, they
are unlikely to be cost effective given the salaries and capital costs involved. In this paper wereport on a subsequent experiment which altered
the collection method to reduce collection costs.
The experiment allows us to “unbundle” various
attributes of the weekly home POS visit in orderto understand which components of the weekly
home visit are central to its impact. Theory
points us in several directions. First, there is thequestion of the frequency at which people areprompted to transact (Field and Pande 2008,
McIntosh 2008). Next, there is the question ofsalience; the extent to which an individual isactively prompted to save (Karlan et al. 2010).
Finally, frequent face-to-face collection may beeffective simply because it inculcates a habit ofsaving.
The unbundling experiment altered the frequency of savings by switching some households from weekly to biweekly (fortnightly)
collection. We altered the salience of savingsby having the bank install a neighborhood savings lockbox rather than sending the deposit
collector door-to-door. Only the bank agent has
the key to this box, and POS receipts are left
behind once the box has been collected on its
regular schedule. We switched both control andtreatment areas to the box treatment, leaving uswith the six treatment combinations illustrated
in Figure 1. These are Weekly Home (the original treatment, which we refer to as “treatment”),
Treatment to Biweekly Home (the experimentin decreasing frequency), Treatment to Weekly
Box (the experiment in decreasing salience),388

AEA PAPERS AND PROCEEDINGS
Baseline data collection
months 1–5

Simple experimentmonths 6–11

Listing exercise:All households within 5–10 km of NSB branch offices
in Mahayangana, Bandarawela
Eligibility criteria:
At least one self-employed individual in household
Household is “unbanked” (no use of acct past 6 months)
Accessible by motorcycle
Intake sample:
829 households
Divided into 176 “zones”.
Treatment assigned at zone level
Attrition:
34 households attrite between Rds 1 & 3
795 households assigned treatment
781 households in final panel sample
Survey frequency:
498 households assigned to monthly surveys
297 households assigned to quarterly surveys(higher frequency of monthly surveys
in core treatment versus control cells)

40 zones remain withweekly home visits(N = 197)
78 zones assigned
to weekly home
visit treatment(N = 389)

78 zones assigned
to control(N = 406)

19 zones move tobiweekly home visits(N = 85)

MAY 2013
Behavioral experimentmonths 12–18“Frequency” experimentwith home visits“Salience” experiment

19 zones move toweekly box pickup(N = 107)
52 zones remain as
pure control(N = 256)
13 zones move toweekly box pickup(N = 89)
13 zones move tobiweekly box pickup(N = 61)“Habit” experiment“Frequency” experimentwith home visits

Figure 1. Research Design

and then Control to Weekly Box, Control toBiweekly Box, and Pure Control. Comparisonof the Treatment to Weekly Box and Control to
Weekly Box provides an estimate of the extent of
habit formation, since a group with and withouta history of Weekly Box collection are switchedto the same treatment status (Weekly Box).
Our results indicate that substantially lessexpensive deposit collection techniques arealmost as effective as Weekly Home visits at
generating deposits for the participating bank.
Surprisingly, the average NSB account balances of the group switched from Control toBiweekly Box treatment grew just as fast as
the Weekly Home treatment over the first ninemonths. The less radical changes had similarly
negligible effects on deposits collected by NSB.
Collection frequency has a strong effect on
deposit amounts, but no effect on overall savings. Decreasing the salience of savings sharply
decreases the number of transactions, but we
see no decrease in total bank savings when participants are switched from Weekly Home to
Weekly Box. A history of savings improves thefrequency, deposit size, and total bank savings
amount when the weekly box is offered, but theeffect of this habit formation appears to be transitory. The community savings lockbox appears
to be a viable financial service for the institution,but one whose effect on total household savings
will be negligible.
I. Unbundling Collection Services: Design

The experimental design is shown in
Figure 1. The original sample was obtained
from areas 5–10 kilometers away from NSB
branches in the towns of Bandarawela andMahiyangana. The bank was already using POS
terminals in these branches to collect deposits
from merchants in a radius of about one kilometer from the branch. We agreed to design acollection program for more remote areas notthen served by the POS program. Within thetarget area, we identified 156 distinct clustersof houses. In August 2010 we conducted a listing exercise, gathering data on employment
and use of banking services for 3,657 households in the 156 clusters.
The listing identified households in which no
member had any transaction with a bank in theprevious month, and in which a primary income
earner received income with a frequency of atleast once per week. In practice, this produceda sample which includes a high percentage of
microenterprise owners—mainly small shops
or vendors of vegetables and other agricultural
products. From the listing, we selected a sample

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unbundling the role of frequency

389

Table 1— Overall Impact of Treatment Unbundling
Survey data

Administrative data

Treated (weekly home visits)
Treatment to biweekly home
Treatment to weekly box
Control to weekly box
Control to biweekly box
Constant
Observations
R2
Number of individuals
Mean in control group

Programdeposits per
month
(1)

Programwithdrawals
per month(2)

Total formaltransactions
per month(3)

Total banksavings per
month
(4)

614.3***(−36.010)−77.770(−59.570)−37.510(−67.380)
238.0***(−45.690)
246.4***(−53.490)
1.684*(−12.430)

266.0***(25.7)
14.9(66.4)
21.7(63.1)
83.2(60.1)
23.1(40.9)
2.3(9.1)

1.567***(0.1)−0.693***(0.1)−0.394***(0.1)
0.985***(0.1)
0.447***(0.1)
0.517***(0.0)

596.9***(116.2)
93.3(177.9)170.3(153.9)135.9(160.8)275.4(199.4)455.6***(68.3)

17.9(250.2)30.7(483.5)−21.5(292.8)−523.5(321.2)−486.3(481.0)3,954***(182.3)763.1**(321.5)21.1(578.3)275.5(400.3)−436.9(467.0)−276.8(569.2)
4,646***(233.6)

10,8750.042
781
010,875
0.249
781
0.5

10,875
0.014
781
744.1

10,8750.014
781
4,284.4

10,8750.014
781
5,222.0

10,8750.146
781
0Total nonbank
Totalsavings per savings per
month
month
(5)
(6)

Notes: Regressions are OLS models with individual-level fixed effects, month dummies, and standard errors clustered at
the individual level to account for autocorrelation. Standard errors are reported in parentheses. The treatment effect for the“Treated” group is estimated relative to the control group, the “Treatment to biweekly home” and “Treatment to weekly box”
are estimated relative to the weekly home visit treatment. The “Control to weekly box” and “Control to biweekly box” are estimated relative to the control group outcome. Regressions include data from rounds 2–18. Parameter estimates statistically different than zero at 99 percent (***), 95 percent (**), and 90 percent (*) confidence.

of 795 individuals. We surveyed 498 of these
individuals monthly with a detailed expenditureand cash flow survey to identify changes in bothformal and informal savings behavior. The other297 were surveyed quarterly so that we could
measure the effect of more frequent surveys on
behavior. The analysis in this paper uses 18 survey rounds for the “monthly survey” households
and eight survey rounds in the “quarterly sample,” as well as administrative data from NSB on
all treatment accounts.
In December 2010 NSB began weekly doorto-door collection services for individuals in
78 clusters selected at random. The collection
services generated savings in NSB accounts
and increased the aggregate savings of households receiving the services. (See Callen etal. 2012 for a more detailed discussion of theeffects of the program on household savingsand other outcomes.) While the door-to-door
services generated savings, it quickly became
clear that the amount being collected from theh­ouseholds made the door-to-door collection
service economically unviable for NSB. Thus,
in May 2011—six months after the beginning ofcollections—we designed the series of “tweaks”
described in Figure 1 to study the effects oflower cost collection methods.
II. Results: Impact on Deposits, Transactions,and Aggregate Savings

Both the original experiment and the tweaks
are balanced on key variables. (See online
Appendix.) Using the full sample, Table 1
shows the effects of each tweak relative to theoriginal treatment/control outcomes. The firsttwo columns use administrative data from NSB,
and the last four columns use the survey data.
The movements of individuals from treatment
are measured relative to those remaining in the
Weekly Home treatment, and the movements ofindividuals from control are measured relative tothose remaining in control.

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AEA PAPERS AND PROCEEDINGS

MAY 2013

The administrative data show the positiveeffect of Weekly Home collection on deposits at NSB (column 1), deposits in any formalbank (column 4) and total monthly savings(column 6). There is no change in the nonbank
savings of the Weekly Home treatment group,
providing further evidence that the formal savings generated under this treatment are truly
additional rather than simply representing a shift
from informal to formal savings.
Relative to the base treatment outcomes,
the change to biweekly collections or to box
rather than home collection decreases deposits by a small and highly insignificant amount(­column 1). The number of transactions falls,
but there are no significant changes in otheroutcomes. Relative to the control outcomes, theinitiation of weekly or biweekly box collection
results in higher deposits at NSB—though theaverage is slightly less than half the level of the
Weekly Home treatment (column 1). The measured effect of the total bank savings increases
by a similar amount, though the greater imprecision of this measure means it is not statisticallysignificant. However, there is no indication that
total savings have increased among those shiftedfrom control to box collection (column 5).
Indeed, the measured effect of total savings relative to those remaining in the control group is
negative, though very insignificant.
The results in Table 1 compare the effect of thevarious treatments to either the Weekly Home orControl groups. The Weekly Home treatment
bundles face-to-face reminders and frequent collection. We can unbundle the components of the
Weekly Home collection by comparing specifictreatments bilaterally. We do this in Table 2. The
top panel compares Weekly Home to BiweeklyHome collection, thus isolating the effect of
frequency. The middle panel compares WeeklyHome visits to Weekly Box collection, isolating
the effect of reminders and salience. The bottom
panel compares the Weekly Home to Box transition with the Control to Box transition, isolating
the habit formation coming from six months ofWeekly Home collection.1

We find that frequency has an effect on NSB
deposits, but an almost equal effect on NSB
withdrawals. The net is that there is no effect on
total NSB savings. Total bank savings and totalsavings are also unaffected. The shift from home
to box collection also has a very small effect on
any outcomes. If anything, it appears the formal
savings goes up in this group with the shift tobox collection. Finally, there does seem to be arole for habit formation. Among the two groups
shifted to Weekly Box collection, those who
had been in the Weekly Home treatment havesignificantly higher NSB/bank savings. Thisdifference is significant using either the administrative (column 2) or survey (column 4) data.
When we examine the time-path of thechanges, we find that the frequency effect isimportant near the time of the transition, but theeffect appears to fade over time. (See Figure F1
in the online Appendix.) Salience, on the other
hand, has little effect initially, but the effectgrows over time. Perhaps the habits formed
through six months of Weekly Home collections are enough to sustain the level of savings without face-to-face reminders for someperiod, but the effect of these habits wears off
over time.
We might worry that the frequent surveying
has an effect on the behavior of the participants.
We examined this by testing whether the treatment effects differ in samples surveyed monthly
rather than quarterly. We find that there is a positive effect for both frequency and salience in thequarterly survey sample, but the effect disappears in the monthly survey sample. This suggests that the reminder provided by the survey
itself may substitute for the reminders provided
by face-to-face and frequent collections. (Seeonline Appendix Table T1.) When instead we
examine survey effects for the households thatswitch from being controls to having access tothe deposit box we see no differences between
the monthly and quarterly samples. This lackof survey effects is potentially important giventhat the next section shows the biweekly box
treatment to be economically viable for the1
The switch to boxes changes more than salience. The
face-to-face collections may lead to feeling pressure todeposit something given the collector’s effort. Depositors
may not trust the box as a safe place to leave deposits. On
the first issue, we find that about 25 percent of those switching from Weekly Home to Weekly Box treatment deposited

something but never more than an average of 50 Sri Lankan
rupees (LKR) per week in any month of Weekly Home collection. Half of these stop making deposits entirely after theswitch to box. Among those making pretweak deposits averaging 100 LKR, only 17 percent never use the box to makea deposit. This suggests that trust is not a first-order issue.

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unbundling the role of frequency

391

Table 2
Survey data

Administrative data
Programdeposits per
month
(1)

Programwithdrawals
per month(2)

Total formaltransactions
per month(3)

Total bank Total nonbank
Totalsavings per savings per savings per
month
month
month
(4)
(5)
(6)

Panel A. Frequency: The impact of maintaining the frequency of visits as weekly rather than biweekly
Weekly home over biweekly
142.4**
94.2
0.855***
−97.4
−60.6
home
(−67.6)(81.1)(0.1)(220.5)(578.0)Observations
2,963
2,963
2,963
2,963
2,963
R2
0.035
0.023
0.065
0.010
0.021
Number of individuals
277
277
277
277
277
Mean in weekly home treatment
897.75567.862.2
1,430.8
3,786.1

9.0(673.0)
2,963
0.018
277
5,407.9

Panel B. Salience: The impact of continuing to visit the home rather than offering the box
Weekly home over weekly box
64.8
0.450**−19.3−364.9*(−82.3)(83.5)(0.2)(199.3)Observations
3,139
3,139
3,139
3,139
0.022
0.021
0.057
0.006
R2
Number of individuals
301
301
301
301
Mean in weekly home treatment
897.75567.862.2
1,430.8−527.7(459.2)
3,139
0.015
301
5,407.9−81.8(329.7)
3,139
0.019
301
3,786.1

Panel C. Habit formation: The impact of having the history of weekly home visits (relative to the control) once offered theweekly box treatment
T to weekly box over C to262.1***
168.2**
0.1
385.3*
528.3
1,156.0
weekly box (rounds 6–11(−79.800)(80.8)(0.2)(225.7)(516.7)(700.6)dropped)Observations
1,603
1,603
1,603
1,603
1,603
1,603
R2
0.131
0.062
0.293
0.028
0.009
0.009
Number of individuals
189
189
189
189
189
189
Mean in control group
0
0
0.5
744.1
4,284.4
5,222.0
Notes: Regressions are OLS models with individual-level fixed effects, month dummies, and standard errors clustered at theindividual level to account for autocorrelation. Standard errors are reported in parentheses. Regressions include data fromrounds 6–18 for the Frequency and Salience panels, and from rounds 2–5 and 12–18 for the Habit Formation panel. Parameter
estimates statistically different than zero at 99 percent (***), 95 percent (**), and 90 percent (*).

bank; there is no indication that the efficacyof the control-to-box switch is driven by the­high-frequency surveys.
III. Economics of Deposit Collection

Weekly face-to-face collections are almost
certainly too costly to be profitable for banks.
The lowest cost collection method we examineis the Biweekly Box collection. We find thatcollections in the group shifting from Control
to Biweekly box are as robust from the start ascollections from the Weekly Home sample. The
Control to Biweekly Box group has somewhat
lower collections when the data are Winsorizedat the ninety-eighth percentile. But even thenthe deposit levels are 75 percent of the WeeklyHome levels. (See online Appendix.)

We examine the economics of POS deposit
collection using all of the methods with which
we experimented. We estimate the costs including labor—the POS terminal operator andadministrative support at the bank—and capital—the costs of POS terminal, motorcycle, andcollection boxes. Based on data from the bank,
we estimate the annual cost of the door-to-doorcollection is just over 800,000 LKR, and theannual cost for the biweekly box collection is232,000 LKR. The largest single cost is thesalary of the deposit collector, almost 500,000
LKR for the Weekly Home collections, but
only a quarter as much for the Biweekly Box
collections.
Against this cost, we estimate the benefitof the collection services. We use the difference between the return on government debt

392

MAY 2013

AEA PAPERS AND PROCEEDINGS(12.5 percent per year as of December 2012)
and the interest rate paid on savings accounts(5 percent) as the net return on intermediated funds. The balances in all of the project
accounts summed to 3.8 million LKR at theend of December 2011. Since total balances
increased by 38 percent between end of Julyand end of October and by 11 percent between
end of October and end of December, we first
assume that the balances will be 20 percent
higher by end of 2012. The POS collectors also
take deposits from people outside the sample,
and the collections will be opened to thosein the control group at the end of 2012. We
account for this in a rough way by assumingthat the total balances from nonsample households would be half the level of the sample
households. This yields balances of 6.8 million LKR and net intermediation revenues of
513,000 LKR, or 256,000 LKR per branch, anamount which exceeds the estimated cost ofgenerating the funds. These very rough estimates suggest that the Biweekly Box collection
services may be viable for NSB.2
For areas in which the mobile phone agent
network is well developed, we can also compare the cost of POS collections with mobile
phone based collection services. Mobile
operators in Sri Lanka pay their wholesaler/retailer network of top-up service agents about
8 percent of revenues in fees. Using the 8 percent rate and data on transactions through the
POS terminals—that is, excluding deposits
made in person at the bank branch—the feesfrom a mobile-phone based product (249,000
LKR) would have exceeded the cost of the
POS operation. Of course, these fees represent average costs of maintaining the agent
network; the marginal costs are likely substantially lower. Nevertheless, the comparison
suggests that personal collections using POS
technology may well maintain a place in themenu of banks.

2
An additional consideration is that NSB has a social
mission of providing financial services to low-income
households. However, we are unable to quantify this.

IV. Conclusions

Frequent face-to-face deposit collection leads
households to increase their aggregate savings over the intermediate term, with increased­balances not offset by any decrease in informal savings. But balances in the deposit-taking
bank also increase with less frequent collections made through lockboxes placed in communities. We find that salience, frequency, andhabits all affect the number of transactions, buthave only smaller and temporary effects on thelevel of deposits. The experiment suggests thateven with rural households of modest income
levels, deposit collection through community
lockboxes may be financially viable for banks.
Of course, collection through community lockboxes requires a degree of trust and security that
may not be present in all locations.
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2006. “Deposit Collectors.” B E Journal of
Economic Analysis and Policy: Advances in
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Callen, Michael, Suresh de Mel, Craig McIntosh,
and Christopher Woodruff, 2012. “What are the

Headwaters of Formal Savings? Experimental Evidence from Sri Lanka.” Unpublished.
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Karlan, Dean, Margaret McConnell, Sendhil
Mullainathan, and Jonathan Zinman. 2010.

“Getting to the Top of Mind: How Reminders Increase Saving.” National Bureau of Economic Research Working Paper 16205.
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