Behavioral Messages and Debt Repayment

Giorgia Barboni, Juan-Camilo Cardenas and Nicolás de Roux
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Giorgia Barboni: University of Warwick, Warwick Business School and CAGE

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

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. We use machine learning tools to assess treatment heterogeneity and find that women, borrowers with lower income and with lower credit score, respond more to behavioral messages. Late customers holding secured products with longer maturity are also more responsive. 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. Our interventions provide novel evidence that behavioral messages are most effective when borrowers are delinquent, poorer, have higher debt, or when they have a strong borrowing relationship with the financial services provider.

Keywords: Loan Delinquency; Behavioral Messages; Personal loans; Field Experiments JEL Classification: G51; D91 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-lma
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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:cge:wacage:633

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