Choice Architecture to Improve Financial Decision Making

We exploit the principles of choice architecture to evaluate in-terventions in the market for reloadable prepaid cards. Participants are ran-domized into three card menu presentation treatments—the market statusquo, a regulation-inspired reform, or an enhanced reform designed to mini-mize attribute overload—and offered choices based on prior structural esti-mation of individual preferences. Consumers routinely choose incorrectlyunder the status quo, with tentative evidence that the regulation-inspiredpresentation may increase best card choice and clear evidence that the en-hanced reform reduces worst card choice. Welfare analysis suggests theregulation-inspired presentation offers modest gains, while the enhancedpolicy generates substantial benefits.