discretionary consumption to generate new savings, but do not experience large learning-by-doing gains, while the “learners” do not cut consumption by as much but experience large learning-bydoing gains. “Savers” are more likely to be females, parents, in positions of low levels of household resource control, and those with low levels of education and experience with financial products. In contrast, “learners” are more likely to be men, those without children, those with higher levels of education, and prior financial access. These results suggest that while the benefits of direct deposits and accounts are spread throughout the population of workers, consumer protection gains from learning-by-doing are largely experienced by those with some prior financial access. More far-reaching interventions may be needed to benefit the least experienced users.

Finally, we ask whether consumer learning generates positive externalities at the market level. We examine this question through an audit study that we conducted in neighborhoods surrounding our study location which differ in the local level of payroll account adoption. In the audit study, factory workers were assigned to visit mobile money agents located in neighborhoods with high versus low levels of payroll account penetration and ask for assistance with a simple financial transaction. The outcome of interest is whether consumers are charged an extra fee for the transaction, which is a practice that is banned by the platform, but extremely common in practice. We find that mobile money agents are significantly less likely to overcharge inexperienced workers in areas with higher payroll account penetration. Specifically, we find that the _same_ worker is 15 percentage points less likely to be overcharged in an area with above-median payroll account penetration. This result is robust to controlling for supply-side factors, such as the density of the agent network, suggests that unsophisticated users stand to benefit as the _average_ user becomes better informed, and implies positive externalities from consumer learning.

Taken together, our results show that financially inexperienced consumers can benefit substantially from payroll accounts when the employer and financial service providers play active roles in the process. Our results reveal that the benefits of payroll accounts arise from two separate channels: the direct benefits of account ownership, as well as the benefits of “learning-by-doing” that generate tangible consumer protection benefits. Subsidizing, rather than restricting, the use of new financial technologies may therefore be an effective approach to reducing some types of consumer protection risks. The results also suggest where scarce regulatory resources should be targeted – toward women and less financially included and experienced populations.

Our paper contributes to three strands of the literature. First, we contribute to a literature on new financial products and consumer protection. While new financial technologies have many features that are helpful to consumers (see Bachas et al. 2017; Carlin et al. 2017; Suri 2017), they may also generate risks, especially for populations with low levels of financial literacy and experience (see Campbell et al. 2011). Several studies show that lenders target less educated consumers and strategically exploit information asymmetries and behavioral biases in a way that harms consumers (Gabaix and Laibson, 2006; Bertrand and Morse, 2011; Dobbie and Skiba, 2013; Gin ́e et al., 2014, 4