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Watch your Wallet closely with online microloans: a two-stage model for delinquency and default risk management

Author

Listed:
  • Jiayan Han

    (Fudan University)

  • Tian Lu

    (Arizona State University)

  • Yunjie Xu

    (Fudan University)

  • Chenghong Zhang

    (Fudan University)

Abstract

Online microloans are a growing financial service. Therefore, resolving the question of how to manage the dynamics of an individual borrower’s risk is crucial. By applying an installment-level borrower behavior dataset, we developed a comprehensive two-stage model for assessing borrowers’ delinquency and default risk for each installment of a loan. We also discovered new risk antecedents such as a borrower’s previous repayment behavior and installment due date factors. This study uncovered three segments of borrowers and their corresponding risk levels. Furthermore, the study evaluated the economic benefit of debt collection. The study findings provide a comprehensive model for evaluating borrowers’ delinquency and risk at the individual and segment levels over time.

Suggested Citation

  • Jiayan Han & Tian Lu & Yunjie Xu & Chenghong Zhang, 2025. "Watch your Wallet closely with online microloans: a two-stage model for delinquency and default risk management," Electronic Commerce Research, Springer, vol. 25(4), pages 2923-2953, August.
    • Handle: RePEc:spr:elcore:v:25:y:2025:i:4:d:10.1007_s10660-023-09778-2
    DOI: 10.1007/s10660-023-09778-2
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