Personal Communication in an Automated World: Evidence from Loan Repayments

79 Pages Posted: 21 Feb 2019

See all articles by Christine Laudenbach

Christine Laudenbach

SAFE and Goethe University

Jenny Pirschel

ZEW – Leibniz Centre for European Economic Research

Stephan Siegel

University of Washington - Michael G. Foster School of Business; CESifo

Multiple version iconThere are 2 versions of this paper

Date Written: 2018

Abstract

We examine the effect of personal, two-way communication on the payment behavior of delinquent borrowers. We find that borrowers who speak with a randomly assigned bank agent are significantly more likely to successfully resolve the delinquency by a substantial margin relative to borrowers who do not speak with a bank agent. Call characteristics related to the human touch of the call, such as the likeability of the agent's voice, significantly affect payment behavior whereas the surprise element of the call does not. Finally, the effect of personal communication extends beyond the initial delinquency: Borrowers who speak with a bank agent are significantly less likely to become delinquent again. Our findings highlight the value of a human element in interactions between financial institutions and their customers, suggesting that personal communication will continue to play a role despite less costly information transmission being readily available.

Keywords: personal communication, consumer finance, loan repayment, promise keeping, social distance

JEL Classification: D140, G110

Suggested Citation

Laudenbach, Christine and Pirschel, Jenny and Siegel, Stephan, Personal Communication in an Automated World: Evidence from Loan Repayments (2018). CESifo Working Paper No. 7295, Available at SSRN: https://ssrn.com/abstract=3338621 or http://dx.doi.org/10.2139/ssrn.3338621

Christine Laudenbach (Contact Author)

SAFE and Goethe University ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany

Jenny Pirschel

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Stephan Siegel

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://faculty.washington.edu/ss1110/

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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