Behavioral Messages and Debt Repayment

46 Pages Posted: 8 Jul 2022 Last revised: 28 Nov 2022

See all articles by Giorgia Barboni

Giorgia Barboni

University of Warwick - Finance Group

Juan-Camilo Cárdenas

Universidad de Los Andes

Nicolás de Roux

Universidad de los Andes - Department of Economics

Date Written: July 6, 2022

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

JEL Classification: G51, D91

Suggested Citation

Barboni, Giorgia and Cárdenas, Juan-Camilo and de Roux, Nicolás, Behavioral Messages and Debt Repayment (July 6, 2022). Documento CEDE No. 22, WBS Finance Group Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4156675 or http://dx.doi.org/10.2139/ssrn.4156675

Giorgia Barboni (Contact Author)

University of Warwick - Finance Group ( email )

Gibbet Hill Rd
Coventry, CV4 7AL
Great Britain

Juan-Camilo Cárdenas

Universidad de Los Andes ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia
339-4949 ext. 2473 (Phone)

Nicolás De Roux

Universidad de los Andes - Department of Economics ( email )

Carrera 1a No. 18A-10
Bogota, AA4976
Colombia

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