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Personal Communication in a Fintech World: Evidence from Loan Payments

Christine Laudenbach, Jenny Pirschel and Stephan Siegel

No 7295, CESifo Working Paper Series from CESifo Group Munich

Abstract: We examine the effect of personal, two-way communication on the behavior of borrowers, who have fallen behind on their consumer loan payments. While the lender has informed all borrowers about the delinquency through an automatically generated letter, some borrowers also receive a phone call from a randomly assigned bank agent. We find that borrowers, who speak with a bank agent typically for only a few minutes, are significantly more likely to make timely payments and significantly less likely to default. This finding holds in a subset of hard-to-reach borrowers as well as when we instrument for the call with exogenous variation in borrowers’ reachability. The effect of the call is also persistent. Borrowers, who receive a call, are significantly less likely to become delinquent again. Personal aspects of the call, such as the likeability of the agent’s voice, significantly affect payment behavior, while the surprise element of the call does not. Our results suggest that the form of communication significantly affects borrowers’ payment behavior.

Keywords: Fintech; communication; guilt aversion; prosocial behavior (search for similar items in EconPapers)
JEL-codes: D03 D10 D14 G20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cbe and nep-pay
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
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