Ryan C. McDevitt grew up in a prosperous Detroit suburb. He went off to college in the 1990s and came back to an area on the decline.
It was quite a case study in economics. The Motor City’s mystique was unravelling as foreign competition and automation left the American car industry decimated.
And it was right up McDevitt’s alley. An assistant professor of economics, he specializes in empirical industrial organization, using data to study how markets are organized and how firms compete with one another.
“I’m fascinated about how consumers make choices, how markets are organized…all of that is interesting to me,” says McDevitt, who started his fourth year at Fuqua this fall.
His prescription for Detroit is to broaden its economic base to include technology, engineering, health care, and education. “Very much like Durham and its own turnaround,” he says.
Before becoming a professor and researcher, McDevitt worked as an analyst for Morgan Stanley. He enjoyed working with clients, but prefers having the time to probe for solutions for the problems that intrigue him.
Earlier this year, McDevitt shared some of his research that could improve check-cashing for low-income workers and businesses. The Federal Deposit Insurance Corporation estimates 10 million U.S. households do not have access to a checking account.
In 2012, 8 percent of Americans used check-cashing services to access $52 billion from paper checks, and paid $1.8 billion in fees for the privilege—almost 4 percent, on average, of the checks themselves, according to the FINRA Investor Education Foundation.
McDevitt conducted the first research in this area based on transactions rather than surveys. He analyzed data from a community bank in New York to better understand how price, distance, and check-clearing time affect this underbanked population.
“We were able to estimate people’s annual income by summing up their checks over a year,” he explains. “We found that among people earning less than $20,000 per year—below the poverty level for a family of three—the rate of check cashing is almost twice as high as families with earnings above that benchmark.”
His research shows low-income families spend a much higher proportion of their income on financial transactions. “We really wanted to know how check-cashing decisions are affected by cost, how far people have to travel, and the time it takes for checks to clear a bank,” he says.
New York caps how much check cashers can charge—it’s currently around 2 percent—and regulates where check cashers can locate. “You can’t locate within three-tenths of a mile of another casher, so existing businesses establish mini-monopolies,” he says.
McDevitt discovered that customers care more about the fees than the distance. “We found check-cashing fees affect demand almost two-and-a-half times as much as travel costs. But the immediacy is what makes the difference… This population is so income-constrained and has this urgent need for cash to pay bills and meet other needs, they’re often willing to pay $20 to get their cash sooner.”
But consumers and businesses could both benefit from small changes, McDevitt explains. “In New York, the state could reduce the state cap on check-cashing fees but give check cashers a larger protected area, such as half a mile rather than the current three-tenths of a mile. Customers would pay less but the businesses would have a larger customer base. As long as you change both, everyone is going to be better off.”
McDevitt, the son and grandson of physicians, likes handing out cures for societal issues and problems. He jokes, “When people call me Dr. McDevitt, I laugh because I’m not going to save anyone’s life.”
But maybe one of his studies will.