Behavioral Messages and Debt Repayment

Giorgia Barboni, Juan Camil Cardenas, Nicolas de Roux

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 latepaying 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.

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