Improving How Customers Understand Financial Products
How to Improve Customers' Understanding of Financial Products: Evidence from Mexico and Peru on the Relative Merits of Disclosure and Financial Literacy
On November 7, 2017, Xavier Giné, lead economist at the World Bank Group, presented findings from a recent study co-authored with Cristina Martínez Cuellar and CGAP's Rafe Mazer of 1,700 consumers in Mexico and Peru on the effectiveness of behavioral-based financial disclosure formats. The study sought to understand what methods of knowledge distribution worked best in helping consumers in Mexico and Peru choose the best financial products. It found that while financial literacy is correlated with better decision-making, the format for disclosing loan terms had an impact that was roughly three times larger than that of financial literacy. A standardized statement listing key facts about the loan significantly improved the ability of consumers to make financial decisions.