IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_7295.html
   My bibliography  Save this paper

Personal Communication in an Automated World: Evidence from Loan Repayments

Author

Listed:
  • Christine Laudenbach
  • Jenny Pirschel
  • Stephan Siegel

Abstract

We examine the effect of personal, two-way communication on the payment behavior of delin-quent 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.

Suggested Citation

  • Christine Laudenbach & Jenny Pirschel & Stephan Siegel, 2018. "Personal Communication in an Automated World: Evidence from Loan Repayments," CESifo Working Paper Series 7295, CESifo.
    • Handle: RePEc:ces:ceswps:_7295
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7295.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dean Karlan & Margaret McConnell & Sendhil Mullainathan & Jonathan Zinman, 2016. "Getting to the Top of Mind: How Reminders Increase Saving," Management Science, INFORMS, vol. 62(12), pages 3393-3411, December.
    2. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    3. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    4. Stefano DellaVigna & John A. List & Ulrike Malmendier, 2012. "Testing for Altruism and Social Pressure in Charitable Giving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 1-56.
    5. Daniel Fernandes & John G. Lynch & Richard G. Netemeyer, 2014. "Financial Literacy, Financial Education, and Downstream Financial Behaviors," Management Science, INFORMS, vol. 60(8), pages 1861-1883, August.
    6. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
    7. Conrads, Julian & Lotz, Sebastian, 2015. "The effect of communication channels on dishonest behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 88-93.
    8. Raj Chetty & Emmanuel Saez & Laszlo Sandor, 2014. "What Policies Increase Prosocial Behavior? An Experiment with Referees at the Journal of Public Economics," Journal of Economic Perspectives, American Economic Association, vol. 28(3), pages 169-188, Summer.
    9. Wei Jiang, 2017. "Have Instrumental Variables Brought Us Closer to the Truth," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 6(2), pages 127-140.
    10. Bruce Carlin & Arna Olafsson & Michaela Pagel, 2017. "FinTech Adoption Across Generations: Financial Fitness in the Information Age," NBER Working Papers 23798, National Bureau of Economic Research, Inc.
    11. Lusardi, Annamaria & Samek, Anya & Kapteyn, Arie & Glinert, Lewis & Hung, Angela & Heinberg, Aileen, 2017. "Visual tools and narratives: new ways to improve financial literacy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(3), pages 297-323, July.
    12. Puri, Manju & Rocholl, Jörg & Steffen, Sascha, 2017. "What do a million observations have to say about loan defaults? Opening the black box of relationships," Journal of Financial Intermediation, Elsevier, vol. 31(C), pages 1-15.
    13. James Andreoni & B. Douglas Bernheim, 2009. "Social Image and the 50-50 Norm: A Theoretical and Experimental Analysis of Audience Effects," Econometrica, Econometric Society, vol. 77(5), pages 1607-1636, September.
    14. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 715-753.
    15. Uriel Haran, 2013. "A Person--Organization Discontinuity in Contract Perception: Why Corporations Can Get Away with Breaking Contracts But Individuals Cannot," Management Science, INFORMS, vol. 59(12), pages 2837-2853, December.
    16. Ximena Cadena & Antoinette Schoar, 2011. "Remembering to Pay? Reminders vs. Financial Incentives for Loan Payments," NBER Working Papers 17020, National Bureau of Economic Research, Inc.
    17. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413.
    18. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022. "Honesty in the Digital Age," Management Science, INFORMS, vol. 68(2), pages 827-845, February.
    19. Tobias Berg & Valentin Burg & Ana Gombović & Manju Puri, 2020. "On the Rise of FinTechs: Credit Scoring Using Digital Footprints," The Review of Financial Studies, Society for Financial Studies, vol. 33(7), pages 2845-2897.
    20. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    21. Julian Conrads, 2014. "The Effect of Communication Channels on Lying," Cologne Graduate School Working Paper Series 05-06, Cologne Graduate School in Management, Economics and Social Sciences.
    22. Alejandro Drexler & Antoinette Schoar, 2014. "Do Relationships Matter? Evidence from Loan Officer Turnover," Management Science, INFORMS, vol. 60(11), pages 2722-2736, November.
    23. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    24. repec:feb:framed:0087 is not listed on IDEAS
    25. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
    26. Colin F. Camerer & Richard H. Thaler, 1995. "Anomalies: Ultimatums, Dictators and Manners," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 209-219, Spring.
    27. Hoffman, Elizabeth & McCabe, Kevin & Smith, Vernon L, 1996. "Social Distance and Other-Regarding Behavior in Dictator Games," American Economic Review, American Economic Association, vol. 86(3), pages 653-660, June.
    28. Christoph Vanberg, 2008. "Why Do People Keep Their Promises? An Experimental Test of Two Explanations -super-1," Econometrica, Econometric Society, vol. 76(6), pages 1467-1480, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022. "Honesty in the Digital Age," Management Science, INFORMS, vol. 68(2), pages 827-845, February.
    2. Alexey A. Upravitelev, 2022. "Bounded Rationality of Decision-Making by Online Microfinance Organizations´ Consumers," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 4, pages 134-147, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022. "Honesty in the Digital Age," Management Science, INFORMS, vol. 68(2), pages 827-845, February.
    2. Dimant, Eugen, 2015. "On Peer Effects: Behavioral Contagion of (Un)Ethical Behavior and the Role of Social Identity," MPRA Paper 68732, University Library of Munich, Germany.
    3. Bruttel, Lisa & Stolley, Florian, 2020. "Getting a yes. An experiment on the power of asking," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 86(C).
    4. Christoph Engel & André Schmelzer, 2017. "Committing the English and the Continental Way – An Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2017_16, Max Planck Institute for Research on Collective Goods.
    5. Ederer, Florian & Stremitzer, Alexander, 2017. "Promises and expectations," Games and Economic Behavior, Elsevier, vol. 106(C), pages 161-178.
    6. Dufwenberg, Martin & Servátka, Maroš & Vadovič, Radovan, 2017. "Honesty and informal agreements," Games and Economic Behavior, Elsevier, vol. 102(C), pages 269-285.
    7. Ellingsen, Tore & Mohlin, Erik, 2022. "A Model of Social Duties," Working Papers 2022:14, Lund University, Department of Economics.
    8. Johannes Abeler & Daniele Nosenzo & Collin Raymond, 2019. "Preferences for Truth‐Telling," Econometrica, Econometric Society, vol. 87(4), pages 1115-1153, July.
    9. Ninghua Du & Lingfang Li & Tian Lu & Xianghua Lu, 2020. "Prosocial Compliance in P2P Lending: A Natural Field Experiment," Management Science, INFORMS, vol. 66(1), pages 315-333, January.
    10. Ellingsen, Tore & Mohlin, Erik, 2019. "Decency," Working Papers 2019:3, Lund University, Department of Economics.
    11. Zultan, Ro’i, 2012. "Strategic and social pre-play communication in the ultimatum game," Journal of Economic Psychology, Elsevier, vol. 33(3), pages 425-434.
    12. Bergh, Andreas & Wichardt, Philipp C., 2018. "Accounting for context: Separating monetary and (uncertain) social incentives," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 72(C), pages 61-66.
    13. Kajackaite, Agne & Gneezy, Uri, 2017. "Incentives and cheating," Games and Economic Behavior, Elsevier, vol. 102(C), pages 433-444.
    14. Khalmetski, Kiryl & Ockenfels, Axel & Werner, Peter, 2015. "Surprising gifts: Theory and laboratory evidence," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 163-208.
    15. Miettinen, Topi, 2013. "Promises and conventions – An approach to pre-play agreements," Games and Economic Behavior, Elsevier, vol. 80(C), pages 68-84.
    16. Festré, Agnès & Garrouste, Pierre, 2014. "Somebody may scold you! A dictator experiment," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 141-153.
    17. Ockenfels, Axel & Werner, Peter, 2012. "‘Hiding behind a small cake’ in a newspaper dictator game," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 82-85.
    18. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    19. Tobias Regner & Gerhard Riener, 2011. "Motivational Cherry Picking," Jena Economics Research Papers 2011-029, Friedrich-Schiller-University Jena.
    20. Peeters, Ronald & Vorsatz, Marc, 2021. "Simple guilt and cooperation," Journal of Economic Psychology, Elsevier, vol. 82(C).

    More about this item

    Keywords

    personal communication; consumer finance; loan repayment; promise keeping; social distance.;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_7295. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.