Behavioral Messages and Debt Repayment

Giorgia Barboni (), Juan-Camilo Cardenas and Nicolás de Roux

No 20257, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: We use a randomized experiment involving 7,029 late-paying clients of a large Colombian bank to compare the effects on loan delinquency of text messages that encourage repayment through different behavioral angles { increased attention, reciprocity, social norms, moral norms, and environmental and sustainability concerns. We find that receiving a behavioral message decreases borrowers' average likelihood to be late by 4%. The effects are more pronounced when messages leverage social norms. Heterogeneity analysis shows that our results are concentrated among late- paying borrowers with a good credit history. We also find evidence that customers who are late on unsecured loan products respond more to the messages. Our intervention provides novel evidence that behavioral messages are most effective when borrowers are marginally struggling to repay and have preferences to be on a good repayment track. In a second experiment pushing the same messages to 8,019 on-time borrowers, we find precisely estimated zero effects, suggesting that these types of messages may not be the right tool to prevent on-time borrowers from falling into loan delinquency.

Keywords: Loan Delinquency; Behavioral Messages; Personal loans; Field Experiments (search for similar items in EconPapers)
JEL-codes: D91 G51 (search for similar items in EconPapers)
Pages: 36
Date: 2022-07-06
New Economics Papers: this item is included in nep-ban, nep-cbe and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Behavioral Messages and Debt Repayment (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000089:020257

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